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Analysts often cite mean reversion as the reason why they will sometimes adjust a beta factor....

Analysts often cite mean reversion as the reason why they will sometimes adjust a beta factor. If an analyst observed a statistically significant beta of 1.71, what would be the adjusted beta? State your answer in two decimal places.

Solutions

Expert Solution

Adjusted beta = statistically significant beta * 2/3 + 1/3

Adjusted beta = 1.71 * 2/3 + 1/3

Adjusted beta = 1.14 + 0.3333333333

Adjusted beta = 1.4733333333

Adjusted beta = 1.47

jeff jeffy answered 2 years ago
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