Research has revealed that regardless of what the current estimate of a firm's beta is, beta will tend to move closer to ________ over time.
A) 1
B) 0
C) -1
D) .5

Question

Quizplus · Accepted Answer

Beta is a measure of a stock's volatility compared to the market, and research has shown that over time, the volatility of a stock tends to approach the volatility of the market as a whole. Since the market beta is always 1 by definition, the answer is A) 1.

Research Has Revealed That Regardless of What the Current Estimate