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In CAPM model, how will stock having beta of -1 react ?

(a) rise with fall in market

(b) fall with fall in market

(c) no effect

(d) none of above ?

Portfolio Management Financials Financial Management
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Question added by Saurabh Aggarwal , Associate Manager , Ernst & Young LLP
Date Posted: 2015/07/09
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SUNIT BANERJEE
by SUNIT BANERJEE , Chief Financial Officer , Sportind Global Private Limited

d) none of the above.

 

I think a negative beta highly unlikely, however, since it would imply less risk than a risk free investment.

If we are going through formula, here we see,  ra =2rf - rm (when the Beta of -1)

 

I am just trying, I do not know much about CAPM. Maybe I am wrong.

Thank you.....

Tasneem Presswala
by Tasneem Presswala , Financial Analyst (Actively Looking for good opportunity) , Al Hasawi refrigerator and water cooler co.

a) rise with fall in market

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