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If the line measuring a stock's historic returns against the market's historic returns has a slope greater than 1.0, then the: stock is currently underpriced.

If the line measuring a stock's historic returns against the market's historic returns has a slope greater than 1.0, then the:

  • stock is currently underpriced.

  • market risk premium is increasing.

  • stock has a significant amount of specific risk.

  • stock has a beta exceeding 1.0.

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