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8. Can the Beta, as used in the CAPM calculation, ever be a negative value? Explain...

8. Can the Beta, as used in the CAPM calculation, ever be a negative value? Explain your answer

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Answer #1

Beta can be negative. A negative beta means investment go in the opposite direction of the market you invested in. ie, as the market fails , the investment rises. The expected return of a negative beta investment will be less than the riskfree rate Gold would be an example for this. Gold is seen as a better investment than other which is why investors sell their stocks and buy gold when there is a downfall in market. Buying a beta investment only make sense if youre buying it as insurance

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