Suppose the Following Equation Best Describes the Evolution of β

question 56

Multiple Choice

Suppose the following equation best describes the evolution of β over time: β_t = 0.31 + 0.82β_{t - 1}.
If a stock had a β of 0.88 last year, you would forecast the β to be _______ in the coming year.

• A) 0.88
• B) 0.82
• C) 0.31
• D) 1.03

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