if you took a company's net income and gambled it at the casino would it's beta be higher or lower than 1? Got asked this in an interview and never got the answer

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I would have thought the return would not be correlated to the market in that scenario. If you run regression of market returns vs this company’s returns the slope (beta) should be close to / zero?

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The beta would be 0 since I’m guessing the return would be totally uncorrelated to the market. Interesting point here is that CAPM only gives credit for systematic risk (the risk of an earthquake vs Walmart doing better than Costco) since you can hedge specific risk.

Here you’d have a beta of 0 while still exposed to non-diversifiable risk...

I suspect the interviewer was trying to see whether you had a good grasp of what beta actually is and how it can be derived over and beyond the “what a beta of 1.1 implies”. I sometimes ask how you would calculate beta if you did not have Bloomberg. Few know...

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Was the guy trying to gauge if you will do a risky trade by asking this question

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Answer is 0 as the casino game is completely random and has no relation to the market.

A1s (wrong) answer is what makes this a good interview question. I bet a lot of people go through entire careers in finance without ever understanding the concept of beta

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