Question
A friend of yours heard that you are studying in college about alpha and beta values and how they relate to stock purchases. Assume that
A friend of yours heard that you are studying in college about alpha and beta values and how they relate to stock purchases. Assume that the stock market has just had a great run and is expected to fall in the coming year. Economic conditions are starting to decline, too. Your friend wants to purchase either the stock of a home improvement chain or a packaged meats company. The home improvement chain stock has a beta value of positive 2. The packaged meats company has a beta value of negative 2. Please explain to your friend in 1 to 2 paragraphs below what exactly beta values mean, and then give your advice based solely on the information that is provided here. Which stock should she buy and why?
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