Which of the Following Is NOT a Potential Problem When

question 8

Multiple Choice

Which of the following is NOT a potential problem when estimating and using betas,i.e. ,which statement is FALSE?

• A) The fact that a security or project may not have a past history that can be used as the basis for calculating beta.
• B) Sometimes,during a period when the company is undergoing a change such as toward more leverage or riskier assets,the calculated beta will be drastically different from the "true" or "expected future" beta.
• C) The beta of an "average stock," or "the market," can change over time,sometimes drastically.
• D) Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed.
• E) The beta coefficient of a stock is normally found by regressing past returns on a stock against past market returns.This calculated historical beta may differ from the beta that exists in the future.

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Definitions:

Factor Analysis

A statistical technique designed to discover the fundamental factors or elements that account for the observed correlation patterns among a collection of variables.

Eta Analysis

A statistical method for measuring the association between qualitative and quantitative variables.

MANOVA

Multivariate Analysis of Variance, a statistical approach used to test the difference between group means on several dependent variables at once.

ANCOVA

Analysis of Covariance, a statistical technique used to adjust the effects of one or more quantitative independent variables while comparing the means of two or more groups.