One would expect a stock with a beta of 1.25 to increase in returns:
A)25% more than the market in up markets.
B)25% more than the market in down markets.
C)125% more than the market in up markets.
D)125% more than the market in down markets.

Question

Quizplus · Accepted Answer

A stock with a beta of 1.25 indicates that the stock is 25% more volatile than the market, meaning it is expected to move in the same direction as the market, but with 25% more magnitude. Therefore, in up markets, the stock should increase by 25% more than the market, which is the closest description to option A.

One Would Expect a Stock with a Beta of 1