Which of the following is NOT a potential problem with beta and its estimation? A) Sometimes a security or project does not have a past history which can be used as a basis for calculating beta. B) Sometimes, during a period when the company is undergoing a change such as toward more leverage or riskier assets, the calculated beta will be drastically different than the “true” or “expected future” beta. C) The beta of “the market,” can change over time, sometimes drastically. D) Sometimes the past data used to calculate beta do not reflect the likely risk of the firm for the future because conditions have changed. E) There is a wide confidence interval around a typical stock’s estimated beta.

Question

Quizplus · Accepted Answer

The beta of "the market" is typically considered to be 1 and does not change over time, as it represents the average risk of the market.

Which of the Following Is NOT a Potential Problem with Beta