If a firm's beta was calculated as 1.6 in a regression equation, a commonly-used adjustment technique would provide an adjusted beta of
A)less than 0.6 but greater than zero.
B)between 0.6 and 1.0.
C)between 1.0 and 1.6.
D)greater than 1.6.

Question

Quizplus · Accepted Answer

The commonly-used adjustment technique for beta is the Blume adjustment, which adjusts the beta towards the market average of 1.0. Since the calculated beta is 1.6, the adjusted beta would be between 1.0 and 1.6.

If a Firm's Beta Was Calculated as 1