What is the most likely explanation for a +20.0% return on a stock with a beta of 1.0 in a month when the market returned +10.0%?
A) The stock is aggressive.
B) The market is undervalued.
C) Favorable firm-specific news was reported.
D) The beta is really less than 1.0.

Question

Quizplus · Accepted Answer

A stock with a beta of 1.0 is expected to move in line with the overall market. However, a 20.0% return in a month when the market returned only 10.0% suggests that the stock had some specific news or events that gave it an additional boost. Therefore, choice C, which suggests that there was favorable firm-specific news, is the most likely explanation for this scenario.

What Is the Most Likely Explanation for a +20