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What is the most likely explanation for a +20.0% return on a stock with a beta of 1.0 in a month when the market returned +10.0%? a. The stock is aggressive. b. The market is undervalued. c. Favorable
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What is the most likely explanation for a +20.0% return on a stock with a beta of 1.0 in a month when the market returned +10.0%?

a. The stock is aggressive.
b. The market is undervalued.
c. Favorable firm-specific news was reported.
d. The beta is really less than 1.0.

User Dexa
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1 Answer

7 votes

Answer:

c. Favorable firm-specific news was reported.

Step-by-step explanation:

Some specific event must have affected the stock's price. E.g. Blackberry and Amazon announced a few days that they would work together and that immediately made Blackberry's stock increase 50% in one single day. These types of events are isolated and do not affect the market as a whole, e.g. Amazon's stock was not affected.

User Pragun
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