Market Equilibrium Your company is following two stocks, ABC plc and XYZ plc, and your manager tells you the following:

‘The shares of ABC plc have traded close to £15 for most of the past four years, and because of this lack of price movement the stock has a very low beta. XYZ plc, on the other hand, has traded as high as £90 and as low as its current £20. Since this stock has demonstrated a large amount of price movement, the stock has a very high beta.’

Do you agree with your manager’s analysis?