The beta of ABC Co.shares is the slope of [blank].
A)the security market line
B)the characteristic line for a plot of returns on the S&P 500 versus returns on short-term Treasury notes
C)the arbitrage pricing line
D)the line of best fit for a plot of ABC Co.returns against the returns of the market portfolio for the same period

Question

Quizplus · Accepted Answer

Beta measures the sensitivity of a stock's returns to changes in the returns of a market portfolio. The line of best fit for a plot of ABC Co. returns against the returns of the market portfolio for the same period is used to calculate the beta of ABC Co. Hence, the correct option is D.

The Beta of ABC Co