A stock having a covariance with the market that is higher than the variance of the market will always have a beta above 1.0.

Question

Quizplus · Accepted Answer

A stock's beta is calculated as the covariance of the stock with the market divided by the variance of the market. Since the given stock has a covariance higher than the variance of the market, its beta will be higher than 1.0, indicating that it is more volatile than the market.

A Stock Having a Covariance with the Market That Is