Question

We would generally find that the beta of a single security is more stable over time...

We would generally find that the beta of a single security is more stable over time than the beta of the market portfolio.

Homework Answers

Answer #1

A stock's beta is the measure of systematic risk or the market risk. In other words, it is the risk associated with a stock or portfolio based on the past prices with respect to changing prices in the market. A well diversified portfolio will always try to mimick the market, so its beta value will always be near 1 and thereabouts. However a single security might show fluctuations with respect to prices and over time the beta can range wide and far.

Answer is False

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A security has a beta of 1.20. Is this security more or less risky than the​...
A security has a beta of 1.20. Is this security more or less risky than the​ market? Explain. Assess the impact on the required return of this security in each of the following cases. 1). The market return increases by​ 15%. b. The market return decreases by​ 8%. c. The market return remains unchanged. A security has a beta of 1.20. Is this security more or less risky than the​ market?  ​(Select the best choice​ below.) A. The security and...
A security with a beta of 1.0 should offer a return Greater than the return on...
A security with a beta of 1.0 should offer a return Greater than the return on the market portfolio Equal to the risk-free interest rate Equal to the return on the market portfolio Between the return on the market portfolio and the risk-free interest rate
PLEASE SHOW YOUR WORK! Consider the previous example with the following four securities Security Weight Beta...
PLEASE SHOW YOUR WORK! Consider the previous example with the following four securities Security Weight Beta DCLK .133 2.685 KO . 2 0 .195 INTC .267 2.161 KEI .4 2.434 Which security has the highest systematic risk? The lowest risk? What is the portfolio beta? Is the systematic risk of the portfolio more or less than the market?
Generally, the bigger the purchase, the more time we should devote to the purchasing decision. a)...
Generally, the bigger the purchase, the more time we should devote to the purchasing decision. a) True b) False
Suppose we have the following information:               Security         Amount invested      Expected Return  &n
Suppose we have the following information:               Security         Amount invested      Expected Return      Beta               Stock A         $2,000                         7%                        0.70               Stock B            4,000                        10                          0.85               Stock C            6,000                        13                          1.10               Stock D            8,000                        16                          1.30 What is the expected return on this portfolio? What is the beta of this portfolio? Does this portfolio have more or less systematic risk than an average asset?
Why are the elements in the second and third transition series generally more stable in higher...
Why are the elements in the second and third transition series generally more stable in higher oxidation states than the elements of the first transition series? Select the correct answer below: Elements in the second and third transition series generally have a high reduction potential and thus resist oxidation. The atomic radii of elements in the second and third transition series are generally larger than those in the first transition series. Metal ions of the first transition series are unstable...
Security A has a beta of 1.0 and an expected return of 12%. Security B has...
Security A has a beta of 1.0 and an expected return of 12%. Security B has a beta of 0.75 and an expected return of 11%. The risk-free rate is 6%. Both these two securities are in the same market. Explain the arbitrage opportunity that exists; explain how an investor can take advantage of it. Give specific details about how to form the portfolio, what to buy and what to sell (we assume that the company-specific risk can be neglected)....
Security A has a beta of 1.0 and an expected return of 12%. Security B has...
Security A has a beta of 1.0 and an expected return of 12%. Security B has a beta of 0.75 and an expected return of 11%. The risk-free rate is 6%. Both these two securities are in the same market. Explain the arbitrage opportunity that exists; explain how an investor can take advantage of it. Give specific details about how to form the portfolio, what to buy and what to sell (we assume that the company-specific risk can be neglected)....
Trans-4-methoxycinnamic avid was converted to beta-bromo-4-styrene. Why is the intermediate of the E isomer more stable...
Trans-4-methoxycinnamic avid was converted to beta-bromo-4-styrene. Why is the intermediate of the E isomer more stable than that of the Z isomer
Observe the following returns over time: Year:                     Stock A:               
Observe the following returns over time: Year:                     Stock A:                Market: 2014                     18%                      14% 2015                     6%                         8% 2016                     23%                      12% Assume that the risk-free rate is 6% and the market risk premium is 5%. a)     What are the expected rates of return on Stock A and the market? b)     What is the standard deviation on Stock A and the market? c)     What is the Beta for Stock X given a correlation to the market of 0.8117? Is Stock A more or less...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT