Question

Stock with a β of 2.3 means that for every 1 percent change in the market overall, the stock tends to change by 2.3 percent in the same direction.

a. True
b. False

Answer 1

A beta of 2.3 does indeed suggest that the stock is more volatile than the market, changing 2.3 times as much in response to market movements.

Step-by-step explanation:

The statement that a stock with a β (beta) of 2.3 means that for every 1 percent change in the market overall, the stock tends to change by 2.3 percent in the same direction is true.

Beta is a measure of a stock's volatility in relation to the market. A beta of 1 means the stock's price tends to move with the market. A beta greater than 1 indicates that the stock is more volatile than the market, while a beta less than 1 indicates it is less volatile.