Which of the following best describes the relationship between a stock's beta and the standard deviation of the stock's returns? A. The relationship depends on the correlation between the stock's returns and the market's returns. B. The higher the standard deviation, the lower the beta. C. The higher the standard deviation, the higher the beta. D. Standard deviation and beta are different ways of measuring the same thing.
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A beta of 1 means the stock moves in line with the market, while a beta greater than 1 means the stock is more volatile than the market, and a beta less than 1 means the stock is less volatile than the market. On the other hand, standard deviation measures the Show more…
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Consider the following stocks and pick the best answer. Stock Standard Deviation Beta A 25% 1.25 B 35% 1.15 C 28% 1.85 Group of answer choices Stock A is likely to provide the lowest expected return Stock A is likely to provide the highest expected return Stock B is likely to provide the highest expected return Stock B is likely to provide the lowest expected return Stock C is likely to provide the lowest expected return
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Which of the following best describes the difference between the interpretation of the correlation coefficient and the beta coefficient for a regression equation expressing the relationship between variables X and Y? A. The correlation coefficient predicts increases or decreases in Y with increases or decreases in X, whereas the beta coefficient provides a unit-free measure of the strength of the relationship. B. The beta coefficient represents the difference between observed and expected values of Y, whereas the correlation coefficient represents the linear relationship between X and Y C. The beta coefficient represents the linear relationship between X and Y, whereas the correlation coefficient represents the percent variability in Y explained by X D. The beta coefficient predicts increases or decreases in Y with increases or decreases in X, whereas the correlation coefficient provides a unit-free measure of the strength of the relationship.
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