A stock with a beta of 1. 25 would be expected to:
A) Increase in returns 25% faster than the market in up markets
B) Increase in returns 25% faster than the market in down markets
C) Increase in returns 125% faster than the market in up markets
D) Increase in returns 125% faster than the market in down markets

Question

Quizplus · Accepted Answer

A beta of 1.25 means that the stock is expected to increase or decrease 1.25 times as much as the overall market. So if the market goes up by 10%, the stock would be expected to go up by 12.5%. Therefore, it would increase in returns 25% faster than the market in up markets.

A Stock with a Beta of 1