Empirical results regarding betas estimated from historical data indicate that
A)betas are constant over time.
B)betas of all securities are always greater than one.
C)betas are always near zero.
D)betas appear to regress toward one over time.
E)betas are always positive.

Question

Quizplus · Accepted Answer

Empirical results suggest that betas tend to regress towards one over time. This phenomenon is referred to as "beta convergence." This means that over time, the systematic risk of a security tends to move towards the average systematic risk of the market as a whole.

Empirical Results Regarding Betas Estimated from Historical Data Indicate That