In: Finance
The correlation coefficient between a stock's return and broad market index returns is 0.60. The stock has a standard deviation of 40%. The market index has a standard deviation of 20%. Calculate the beta coefficient.
Multiple Choice
0.3
0.6
0.9
1.2
1.5
Beta (By Correlation method) = Correlation Coefficient of Stock Return and Market Index *( Standard deviation of Asset / Standard deviation of market)
= 0.60 * (0.40/0.20)
= 0.60 * 2
= 1.20
Option D (1.20) is the correct answer