Which of the following makes this a true statement? Ideally, when searching for a beta for a new line of business
A) one could find other firms engaged in the proposed new line of business and use their betas as proxies to estimate the project's risk.
B) one would like to find at least three or four pure-play proxies.
C) two (or even one) proxies might represent a suitable sample if their line of business resembles the proposed new project closely enough.
D) All of these choices are correct.

Question

Quizplus · Accepted Answer

All of the options provided are valid strategies for estimating the beta of a new line of business. Using betas from firms in the same line of business, seeking multiple pure-play proxies, and even using a small number of closely related proxies can all contribute to a more accurate estimation of the project's risk.

Which of the Following Makes This a True Statement? Ideally