The historic beta of a firm is of little use as a forecast of the firm's future systematic risk characteristics when

Question

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When a firm is expanding into a new product line, its future systematic risk characteristics may be significantly different than its past characteristics. Therefore, the historic beta of the firm would not be a reliable forecast of the firm's future systematic risk. A growing firm or expanding an existing product line may also have some impact on its future systematic risk, but it may not be as significant as expanding into a completely new product line.

The Historic Beta of a Firm Is of Little Use