Adjusted Beta Question

CFA Level II
#1

Company X has a beta of 1.6. We can most likely assume that: A) the beta will be between 1.6 and 2 B) the future beta will be less than 1.0. C) the future beta will be less than 1.6 but greater than 1.0. D) the beta will be greater than 2.0

#2

c

#3

Agree with Lance.

#4

0.33 + 0.66 * 1.6 = 1.386 C

#5

C?

#6

C

#7

cccc

#8

When are adjusted betas used?

#9

…to correct the beta instability problem arising from the incorrect estimation of future by using the past

#10

use 1/3 + 2/3*(calculated beta) if beta is greater than one, adjusted will pull it down toward one. if beta is less than one, adjusted will pull it up toward one.

#11

mean reversion

#12

bo / 1-b1 … oh wait…

#13

C is correct