A stock recently has been estimated to have a beta of 1.30:
a. What will a beta book compute as the “adjusted beta” of this stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Adjusted beta
b. Suppose that you estimate the following regression describing the evolution of beta over time:
βt = 0.6 + 0.4βt–1
What would be your predicted beta for next year? (Do not round intermediate calculations. Round your answer to 3 decimal places.)
Predicted beta