Sluggish beta refers to:
A) the optimal value of beta does not change with payoffs
B) empirical beta values are affected by probabilities
C) as optimal beta is adjusted by probabilities or payoffs, there is a smaller shift in empirical beta values than is necessary
D) as optimal beta is adjusted by probabilities or payoffs, there is a larger shift in empirical beta values than is necessary

Question

Quizplus · Accepted Answer

Sluggish beta refers to the phenomenon where, as the optimal beta is adjusted due to changes in probabilities or payoffs, the empirical beta values do not shift as much as they theoretically should. This results in a smaller change in empirical beta values than necessary, indicating a sluggish response to new information or changes in the market environment.

Sluggish Beta Refers To