Which of the following statements about the beta coefficient is false?
|A||A stock’s beta coefficient measures its volatility relative to the market portfolio.|
|B||A stock’s beta coefficient can be estimated by plotting the stock’s returns versus the market portfolio’s returns.|
|C||A stock’s reported beta coefficient is based on forecasted future volatility.|
|D||A stock with a beta coefficient greater than 1.0 is said to be riskier than the market portfolio.|
|E||Using the capital asset pricing model, a stock with a beta coefficient less than 1.0 would have a required rate of return that is lower than the required rate of return on the market portfolio.|
Beta represents Sytematic risk
It represents stocks systematic risk with respect to Market risk.
Beta =1 means Stock risk equals to Market risk
Beta >1 means Stock risk > Market risk
Beta <1 means Stock risk < Market risk
CAPM Return = Rf + Beta ( Rm - Rf)
If Beta < 1, Stock Req Ret < Rm
It can be computed by plotting STock Ret Vs Market Return.
It is calculated based on past data not based on estimated future data.
Thus Option c is false statement
Get Answers For Free
Most questions answered within 1 hours.