If the line measuring a stock's historic returns against the market's historic returns has a slope greater than 1.0,then the:
A) stock is currently underpriced.
B) market risk premium is increasing.
C) stock has a significant amount of specific risk.
D) stock has a beta exceeding 1.0.

Question

Quizplus · Accepted Answer

A slope greater than 1.0 indicates that the stock has higher volatility than the market, which means that the stock has a beta exceeding 1.0. Beta measures the systematic risk of a stock and represents how much the stock's returns fluctuate in response to changes in the overall market. Therefore, the correct answer is D.

If the Line Measuring a Stock's Historic Returns Against the Market's