You observe that AT&T stock and the S&P 500 have the following weekly returns: If this pattern of stock returns is typical of AT&T stock, and you calculated a beta against the S&P 500, which of the following is true?
A) AT&T's beta is negative.
B) AT&T's beta is zero.
C) AT&T's beta is positive.
D) Cannot be determined from information given.

Question

You observe that AT&T stock and the S&P 500 have the following weekly returns:  If this pattern of stock returns is typical of AT&T stock, and you calculated a beta against the S&P 500, which of the following is true?
A) AT&T's beta is negative. 
B) AT&T's beta is zero. 
C) AT&T's beta is positive. 
D) Cannot be determined from information given.

Quizplus · Accepted Answer

The question states that the pattern of stock returns is typical of AT&T stock, which means that its beta can be calculated against the S&P 500. Since the weekly returns of both the stock and the index are positive, it suggests a positive correlation between the two. Therefore, AT&T's beta should also be positive.

You Observe That AT&T Stock and the S&P 500 Have