question archive If a stock consistently goes down (up) by 1
If a stock consistently goes down (up) by 1
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If a stock consistently goes down (up) by 1.51% when the market portfolio goes down (up) by 1.05%, then its beta equals:
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Beta reflects the changes in a stock due to the changes in a market. It provides a relative position of movement in stock to the market.
Change in market = +1.05%
Change in stock = +1.51%
Beta of the stock shall be:
Change in stock / Change in market
1.51 / 1.05
= 1.438
The beta shall be 1.44 (after rounding off to two decimal places)
