If a stock's beta is 0.8 during a period when the market portfolio was down by 10%,then,a priori,we could expect this individual stock to:
A) lose more than 10%.
B) lose, but less than 10%.
C) gain more than 10%.
D) gain, but less than 10%.

Question

Quizplus · Accepted Answer

A stock with beta 0.8 is expected to move 0.8 times as much as the market. Since the market was down 10%, this stock can be expected to lose 0.8 times 10%, or 8%. Therefore, the stock would lose less than 10%, making option B the correct answer.

If a Stock's Beta Is 0