A fully hedged stock portfolio will have a beta equal to which one of the following?
A)an average asset
B)U.S. Treasury bill
C)S&P 500
D)the beta of the stock portfolio exclusive of the hedge
E)one-half of the beta of the stock portfolio exclusive of the hedge

Question

Quizplus · Accepted Answer

A fully hedged stock portfolio should have a beta of zero, as the hedge removes all market risk. Thus, the beta of a fully hedged stock portfolio is equal to the beta of a risk-free asset, such as a U.S. Treasury bill, which has a beta of zero.

A Fully Hedged Stock Portfolio Will Have a Beta Equal