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What does a reduced liquidity premium indicate

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The standard deviation of the earnings on State Bank of India shares is 40%, while for Siemens it is only 28%. However, State Bank of India has a β of 1.13 and Siemens of 1.7. Explain how this is possible. Anyone?

What does a reduced liquidity premium indicate?

What is the drawback of the β coefficient?

Explain in a few lines why diversifiable risk cannot be remunerated on markets in equilibrium.

How do you explain the fact that rates of return required by investors may be identical for two groups of totally different activities (oil and IT services, for example) as long as they have the same β ?

A shareholder requires a rate of return that is twice as high on a share with a β coefficient that is twice as high as that of another share. Will this work?

Reference no: EM132595724

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