Compute the domestic country beta of Stansfield Bicycles as well as its world beta.

Question

Quizplus · Accepted Answer

The domestic beta captures the sensitivity of a company's stock returns to changes in the domestic market index while the world beta captures sensitivity to changes in the global market index.
If Stansfield Bicycles operates only in its domestic country, then its domestic beta would be 1.00, as it would move in perfect sync with the market. 
On the other hand, if Stansfield Bicycles operates globally, its stock returns would be influenced by fluctuations in global markets, and its beta would be less than 1.00. Therefore, its world beta would be 0.80, indicating a lower sensitivity to overall global market conditions. Therefore, the option A is the best choice.

Compute the Domestic Country Beta of Stansfield Bicycles as Well