The formula for beta is
A) $\beta _ { i }$ = $\frac { \bar { R } i - R _ { f } } { ( \bar { R } M - R f ) }$
B) $\beta _ { i }$ =
$\frac{\rho_{R}, 1, R M}{2}$
$\sigma \mathcal{R} M$
C) $\beta _ { i }$ = $\frac { \operatorname { Cov } \left( \mathcal { R } _ { i } , \mathcal { R } M \right) } { \operatorname { Var } \left( \left( R _ { M } \right) \right. }$
D) $\beta _ { i }$ = $\frac { \operatorname { Corr } \left( \mathcal { R } _ { i } , \mathcal { R } M \right) } { \operatorname { Var } \left( \left( R _ { M } \right) \right. }$

Question

The formula for beta is
A) $\beta _ { i }$ = $\frac { \bar { R } i -  R _ { f } } { ( \bar { R } M - R f ) }$
B) $\beta _ { i }$ = 
$\frac{\rho_{R}, 1, R M}{2}$
$\sigma \mathcal{R} M$
C) $\beta _ { i }$ = $\frac { \operatorname { Cov } \left( \mathcal { R } _ { i } , \mathcal { R } M \right) } { \operatorname { Var } \left( \left( R _ { M } \right) \right. }$
D) $\beta _ { i }$ = $\frac { \operatorname { Corr } \left( \mathcal { R } _ { i } , \mathcal { R } M \right) } { \operatorname { Var } \left( \left( R _ { M } \right) \right. }$

Quizplus · Accepted Answer

The formula for beta is the covariance between the stock's return and the market's return divided by the variance of the market's return. Option C is the only choice that correctly represents this formula. Option A has a similar formula, but it includes the stock's own average return, which is not part of the beta calculation. Option B includes the correlation between the stock's return and the market's return as well as the volatility of the market, but it is missing the variance of the market, which is necessary for the beta calculation. Option D includes the correlation between the stock's return and the market's return, but it is missing the variance of the market, which is necessary for the beta calculation. Therefore, option C is the best choice as it represents the correct formula for beta.

The Formula for Beta Is A) βi\beta _ { i }βi​

The Formula for Beta Is
A) $\beta _ { i }$