Last month a stock with a beta of 1.0 lost 20% while the S&P 500 had a 10% gain.Given this,it is most likely that the:
A) stock's beta has been calculated incorrectly.
B) S&P 500 cannot represent the overall market.
C) firm released some negative information about itself.
D) the market index had an exceptionally good month.

Question

Quizplus · Accepted Answer

A stock with a beta of 1.0 is expected to move in line with the market. If it significantly underperforms, it is likely due to firm-specific negative information rather than an incorrect beta calculation or issues with the market index.

Last Month a Stock with a Beta of 1