Which of the Following Statements About Beta Is Correct

question 75

Multiple Choice

Which of the following statements about beta is correct?

• A) If the returns on a stock vary widely, then its standard deviation is large, and as a result, the stock will also have a large beta coefficient.
• B) A stock's standard deviation of returns is a measure of the stock's stand-alone risk, while its beta measures its unsystematic risk.
• C) A portfolio that contains 100 high-beta stocks will not be riskier than a portfolio containing 100 low-beta stocks.
• D) A stock that is perfectly positively correlated with the market would not have a beta coefficient that is greater than one.
• E) A stock with a negative beta has very high firm-specific risk.

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Definitions:

Equation

A mathematical statement that asserts the equality of two expressions.

Unit Change

A term describing the effect of a one-unit increase in the independent variable on the dependent variable in the context of statistical models, particularly regression analysis.

Regression Assumptions

Conditions that must be met for the regression analysis results to be valid, including linearity, independence, homoscedasticity, and normality of residuals.

F Distribution

A probability distribution that arises in the testing of whether two population variances are equal and in the analysis of variance (ANOVA) for comparing means among more than two groups.