Matthews Corporation has a beta of 1.2.The annualized market return yesterday was 13%, and the risk-free rate is currently 5%.You observe that Matthews had an annualized return yesterday of 17%.Assuming that markets are efficient, this suggests that
A)bad news about Matthews was announced yesterday.
B)good news about Matthews was announced yesterday.
C)no news about Matthews was announced yesterday.
D)interest rates rose yesterday.

Question

Quizplus · Accepted Answer

Matthews Corporation had a higher annualized return than the market return and its beta is greater than 1, indicating that it is more volatile than the market. This suggests that good news about Matthews was announced yesterday, causing its stock price to rise more than the overall market. If bad news had been announced, Matthews stock price would likely have decreased more than the overall market, and if there was no news, the stock price would have moved in line with the market. The interest rates are not relevant to this analysis.

Matthews Corporation Has a Beta of 1