Economics & AnalysisQuestion 7 of 110
A stock's beta is 1.5. If the market rises 10%, what does beta suggest about the stock's expected move?
a.The stock would be expected to rise about 15%
b.The stock would be expected to rise about 6.7%
c.The stock is uncorrelated with the market
d.The stock would be expected to fall about 15%
Explanation
Beta measures systematic risk relative to the market; a beta of 1.5 means the stock is expected to move 1.5 times as much as the market. A 10% market gain implies an expected 15% gain. Beta above 1.0 indicates greater volatility than the market.
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