If a stock has a beta of 1 and the market rose 30% over the last 12 months, what does that imply about the stock's performance?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $24.99Unlock all

Prepare for the Sales and Trading Interview Test with comprehensive flashcards and multiple choice questions. Each question offers valuable hints and detailed explanations to ensure you're ready for your interview!

Multiple Choice

If a stock has a beta of 1 and the market rose 30% over the last 12 months, what does that imply about the stock's performance?

Explanation:
Beta measures how a stock’s returns move with the market. A beta of 1 means the stock tends to move in step with the market. If the market rose 30%, a stock with beta 1 would be expected to rise about 30% as well, though actual results can differ due to company-specific factors. So the implication is that the stock matched the market, not underperformed. Underperforming would require a return noticeably less than the market’s 30%.

Beta measures how a stock’s returns move with the market. A beta of 1 means the stock tends to move in step with the market. If the market rose 30%, a stock with beta 1 would be expected to rise about 30% as well, though actual results can differ due to company-specific factors. So the implication is that the stock matched the market, not underperformed. Underperforming would require a return noticeably less than the market’s 30%.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy