You observe that AT&T stock and the S&P 500 have the following weekly returns: If this pattern of stock returns is typical of AT&T stock,and you calculated a beta against the S&P 500,which of the following is TRUE?
A)AT&T's beta is negative.
B)AT&T's beta is zero.
C)AT&T's beta is positive.
D)AT&T's beta is highly negative.
E)Beta cannot be calculated from this data.

Question

You observe that AT&T stock and the S&P 500 have the following weekly returns:  If this pattern of stock returns is typical of AT&T stock,and you calculated a beta against the S&P 500,which of the following is TRUE?
A)AT&T's beta is negative. 
B)AT&T's beta is zero. 
C)AT&T's beta is positive. 
D)AT&T's beta is highly negative. 
E)Beta cannot be calculated from this data.

Quizplus · Accepted Answer

The question implies that the weekly returns of AT&T stock are positively correlated with the S&P 500, which means that if the S&P 500 goes up, so does AT&T stock, and vice versa. This suggests that AT&T has a positive beta, meaning it is likely to outperform the market when the market is rising, and underperform when the market is falling. Therefore, the correct answer is C) AT&T's beta is positive.

You Observe That AT&T Stock and the S&P 500 Have