Question

In: Finance

Which has a higher systematic risk and why? (A) a stock with a slope(beta) of 0.8...

Which has a higher systematic risk and why?

(A) a stock with a slope(beta) of 0.8 and R^2 of 0.7

(B) a stock with a slope(beta) of 0.4 and R^2 of 0.3

Solutions

Expert Solution

stock that had the highest slope of Beta and highest R squared will be reflecting the highest deviation so the stocks which has highest R squared highest beta will be having overall high systematic risk.

Correct answer will be option ( A) a stock with a slope of point 8 and R squared of 4.7.


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