You are given the following returns on "the market" and Stock F during the last three years. We could calculate beta using data for Years 1 and 2 and then, after Year 3, calculate a new beta for Years 2 and 3. How different are those two betas, i.e., what's the value of beta 2 - beta 1? (Hint: You can find betas using the Rise-Over-Run method, or using your calculator's regression function.)
Year | Market | Stock F |
1 | 6.10% | 0.00% |
2 | 12.90% | −3.70% |
3 | 16.20% | 21.71% |
Select the correct answer.
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Answer is as follows:
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