Question: Given the following results, indicate what will happen to the beta for Sophie Fashion Co., relative to the market proxy, compared to the beta relative

Given the following results, indicate what will happen to the beta for Sophie Fashion Co., relative to the market proxy, compared to the beta relative to the true market portfolio:

Discuss the reason for the differences in the measured betas for Sophie Fashion Co. Does the suggested relationship appear reasonable? Why or whynot?

YEARLY RATES OF RETURN Year Sophie Fashion(%) 10 20 -14 -20 15 Market Proxy(96) True Market(%) 14 -10 -18 12 -7 10

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