What explains why a stock with a negative beta would have a lower return than a...

What explains why a stock with a negative beta would have a lower return than a risk-free t bill? Under what situation would buying a stock with a negative beta make any sense for an investor?

Expert Solution

jeff jeffy answered 2 years ago

Why is a stock split not positive or negative for an investor’s return on a stock?

What is Beta of a Stock? What is the expected return of a stock according to...

What is Beta of a Stock? What is the expected return of a stock according to the CAPM model?

Would a stock that pays no dividends have any value? What about a stock with negative...

Would a stock that pays no dividends have any value? What about a stock with negative earnings (a negative P/E ratio)? What about a company with negative free cash flow? What do you think?

Historically high return stocks have exhibited lower risk than low return stocks….just the opposite what the...

Historically high return stocks have exhibited lower risk than low return stocks….just the opposite what the SML (Security Market Line) predicts. Wall Street ( and unsuspecting financial planners) has been very successful in selling main street the story that higher risk = higher reward, while the smart money knows this and is able to effectively arbitrage excess returns from low risk stocks? To what extent does this make sense? Discuss and elaborate your response.

What is measured by a stock’s “beta”? Suppose that stock A has a higher beta than...

What is measured by a stock’s “beta”? Suppose that stock A has a higher beta than stock B, but its rate of return has a lower standard deviation than that of stock B. According to the CAPM, which stock should be expected to offer a higher average rate of return? Explain.

Is Positive Beta Better than Negative Beta? A Beta factor represents risk in a financial instrument...

Is Positive Beta Better than Negative Beta? A Beta factor represents risk in a financial instrument or commodity. 1. Explain the reasons for changes in beta and explain if one should be more concerned with a negative versus positive factor. Be sure to reference volatility. 2. Please provide an example of negative Beta. 3. PLEASE LIST REFERENCES PLEASE HAVE IT TYPED NOT HANDWRITTEN, I CANNOT UNDERSTAND HAND WRITTEN. THANK YOU

1. What is the required rate of return on a stock with a beta of 0.6?...

1. What is the required rate of return on a stock with a beta of 0.6? Round your answer to one decimal place ____ 2. Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 4.5% rate of inflation in the future. The real risk-free rate is 1.5%, and the market risk premium is 5.5%. Mudd has a beta of 2.5, and its realized rate of return has averaged 11.5% over the past 5 years. Round...

How lower required rate of return would increase stock prices? Please explain in detail

Everyone agrees stock A is riskier than stock B, but they have the same expected return....

Everyone agrees stock A is riskier than stock B, but they have the same expected return. (a) Which would you prefer to buy? Why? (i) Stock A. (ii) Stock B. (b) In order for someone to want to hold the stock, you don't like, what would have to happen to the price of that stock, assuming the other stock remains unchanged? Why? (i) Price goes up. (ii) Price goes down. (c) If the price changes as described in (b), what...

What function does the CAPM fulfill? What is the role of Beta? Explain the role that Beta plays in determining the return on a stock?

What function does the CAPM fulfill? What is the role of Beta? Explain the role that Beta plays in determining the return on a stock? If the market is up 10 percent and the Beta of the stock is 2, what is suggested regarding the expected return on that stock? What if the market is down 10 percent; what then is the expected return on that stock?

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