Empirical results estimated from historical data indicate that betas _________.
A) are always close to zero
B) are constant over time
C) of all securities are always between zero and one
D) seem to regress toward one over time

Question

Quizplus · Accepted Answer

Empirical results suggest that betas tend to regress toward one over time. This means that, in the long run, stocks tend to become more correlated with the overall market, and their betas approach the market beta of 1.0. The other answer choices are incorrect because betas can vary widely depending on the individual security, and are not always close to zero or between zero and one. Additionally, betas are not typically constant over time, as they can be influenced by changes in the company's financial structure, market conditions, and other factors.

Empirical Results Estimated from Historical Data Indicate That Betas _________