The table below gives the historic return over the past five months for the market portfolio and two assets: A and B.Which of the answers below best describes the historic beta for A and B?

Question

The table below gives the historic return over the past five months for the market portfolio and two assets: A and B.Which of the answers below best describes the historic beta for A and B? A) β_A < 0; β_B = 0 B) β_A > 0; β_B = +1 C) β_A > 0; β_B = 0 D) β_A > +1; β_B = 0 E) β_A < -1; β_B = +1

Quizplus · Accepted Answer

Beta tells us that if the market's return changes by X%, then the asset's return changes by β*X%.
From the table, for each change in the return of the market, the return of A changes by a greater amount in the same direction implying that asset A's beta is greater than one.
The return on asset B does not change, implying that asset B's beta is 0.

The Table Below Gives the Historic Return Over the Past