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
Agree with Lance.
0.33 + 0.66 * 1.6 = 1.386 C
When are adjusted betas used?
…to correct the beta instability problem arising from the incorrect estimation of future by using the past
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.
bo / 1-b1 … oh wait…
C is correct