Question

Which of the following help explain why beta values on the same stock can vary, if in fact they do vary? Select all that apply.

A. Returns for different reporting intervals were used, i.e., weekly versus monthly returns
B. The beta value on a single stock will remain constant over time.
C. A different index was used as the market portfolio, i.e., the Wilshire 5000 versus the S&P 500
D. A different time period was used, i.e., 1997-1999 versus 1998-2000

Answer 1

Beta values can vary for a single stock due to different reporting intervals used, the use of different market indices as a reference, and the evaluation over different time periods. The beta of a stock does not remain constant as it is influenced by varying market and company-specific factors. The correct answer is option B.

Step-by-step explanation:

The beta values on the same stock can vary due to a few factors:

• Returns for different reporting intervals were used, i.e., weekly versus monthly returns
  
  
• A different index was used as the market portfolio, i.e., the Wilshire 5000 versus the S&P 500
  
  
• A different time period was used, i.e., 1997-1999 versus 1998-2000

Option B is incorrect because the beta value on a single stock will not remain constant over time due to changes in the company's risk profile and market conditions. Market volatility, company performance, and various economic factors contribute to changes in a stock's beta.