If a firm's beta was calculated as 1.3 in a regression equation, a commonly-used adjustment technique would provide an adjusted beta of
A) less than 1.0 but greater than zero.
B) between 0.3 and 0.9.
C) between 1.0 and 1.3.
D) greater than 1.3.
E) zero or less.

Question

Quizplus · Accepted Answer

The commonly-used adjustment technique for beta, known as the Blume's method, adjusts the beta towards 1 (the market beta), meaning if the original beta is more than 1, the adjusted beta would be between 1 and the original beta.

If a Firm's Beta Was Calculated as 1