If you plotted the returns of Selleck & Company against those of the market and found that the slope of your line was negative, the CAPM would indicate that the required rate of return on Selleck's stock should be less than the risk-free rate for a well-diversified investor, assuming that the observed relationship is expected to continue in the future.

Question

Quizplus · Accepted Answer

In the CAPM, a negative beta indicates that the stock moves inversely to the market. If the beta is negative, the expected return could be less than the risk-free rate, as the stock is considered to reduce portfolio risk.

If You Plotted the Returns of Selleck & Company Against