Which of the following are needed to compute the beta of an individual security?
I. average return on the market for the period
II. standard deviation of the security and the market
III. returns on the security and the market for multiple time periods
IV. correlation of the security to the market
A)I and III only
B)I and IV only
C)II and III only
D)II and IV only
E)I, II, and III only

Question

Quizplus · Accepted Answer

To compute the beta of an individual security, we need the standard deviation of the security and the market as well as the correlation of the security to the market. Therefore, the correct choices are II and IV only. The average return on the market and returns on the security and the market for multiple time periods are helpful but not necessary for computing the beta.

Which of the Following Are Needed to Compute the Beta