You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible answers best describes the historical betas for A and B?
Years
Market
Stock A
Stock B
1
0.03
0.16
0.05
2
?0.05
0.20
0.05
3
0.01
0.18
0.05
4
?0.10
0.25
0.05
5
0.06
0.14
0.05
A. bA> +1; bB = 0.
B. bA = 0; bB = ?1.
C. bA< 0; bB = 0.
D. bA< ?1; bB = 1.
E. bA> 0; bB = 1.
Answer: C
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