In the results of the earliest estimations of the security market line by Miller and Scholes (1972), it was found that the average difference between a stock's return and the risk-free rate was ________ to its beta.
A)positively related
B)negatively related
C)unrelated
D)inversely related

Question

Quizplus · Accepted Answer

Miller and Scholes found that the average difference between a stock's return and the risk-free rate was positively related to its beta. This relationship became known as the security market line, which is a linear relationship between the expected return of a stock, the risk-free rate, and the stock's beta.

In the Results of the Earliest Estimations of the Security