Question

The beta of a stock has been estimated as 1.8 using regression analysis on a sample of historical returns. A commonly used adjustment technique would provide an adjusted beta of

a) 1.13
b) 1
c) 1.53
d) 1.20

Answer 1

The question asks about the estimation and adjustment of beta in stock regression analysis. The correct adjusted beta cannot be determined based on the given options without additional information.

Step-by-step explanation:

The question is asking about the estimation and adjustment of beta in stock regression analysis. Beta is a measure of a stock's volatility in relation to the overall market. In this case, the estimated beta is 1.8, but the question asks for the adjusted beta using a common adjustment technique.

One commonly used adjustment technique is the industry beta approach, which adjusts the estimated beta by considering the average beta of other stocks in the same industry. However, the given options do not provide specific adjustments based on this technique.

Therefore, without additional information, it is not possible to determine the correct adjusted beta from the given options.