Question

A stock has a correlation with the market of 0.64. The standard deviation of the market is 30%, and the standard deviation of the stock is 38%. What is the stock's beta

Answer 1

0.811

Step-by-step explanation:

Calculation to determine What is the stock's beta

Using this formula

Stock's beta=Market correlation*Stock standard deviation*Market standard deviation/Market standard deviation^2

Let plug in the formula

Stock's beta=(0.64)(0.38)(0.30)/0.30^2

Stock's beta=0.07296/0.09

Stock's beta=0.811

Therefore the stock's beta is 0.811