A beta coefficient for a stock of 0.8 implies
A) an 8% return on the market will cause the return on this stock to be 10%
B) an 8% decrease in the market will cause the return on this stock to be 8%
C) a return of 10% on the market will cause the return on this stock to be 8%
D) a return of 10% on the market will cause the return on this stock to be ‑8%

Question

A beta coefficient for a stock of 0.8 implies​
A) ​an 8% return on the market will cause the return on this stock to be 10%
B) an 8% decrease in the market will cause the return on this stock to be 8%​
C) ​a return of 10% on the market will cause the return on this stock to be 8%
D) a return of 10% on the market will cause the return on this stock to be ‑8%​

Quizplus · Accepted Answer

A beta coefficient of 0.8 means that the stock moves 80% in the same direction as the market. Therefore, if the market returns 10%, this stock would be expected to return 0.8(10%) = 8%.

A Beta Coefficient for a Stock of 0