Question

Annual returns for stocks X, Y, Z, and the Market are given below for the time period 2008 to 2013. From the information given in the table above, which of the following choices best describes the betas (B) of Stock X, Stock Y, and Stock Z Year 2008 2009 2010 2011 2012 2013 Stock X 0.20 0.12 0.03 0.15 0.20 0.32 Stock Y 0.12 0.13 0.14 0.12 0.11 0.08 Stock Z 0.08 0.08 0.08 0.08 0.08 0.08 Market 0.13 0.09 0.07 0.19 0.25 0.35 Select one a. Beta of X < 0, Beta of Y > 0, Beta of Z = 0 O b. Beta of X 0, Beta of Y >0, Beta of Z0 O c. Beta of X<O, Beta of Y 0, Beta of Z < 0 d. Beta of X > 0, Beta of Y < 0, Beta of Z = 0 e. Beta of X > 0, Beta of Y > 0, Beta of Z = 0

Answer 1

1.
Option d
Beta of X>0, Beta of Y<0, Beta of Z=0
As Z is having constant returns, so beta=0
As X is moving in market's direction beta>0
As X is moving opposite market's direction beta<0

2.
Option e