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Are US Treasury Bills still Zero Beta?
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Anna
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Anna, UK

Are US Treasury Bills still Zero Beta?

The books say that beta can be zero for absolutely risk-free stocks. US Treasury Bills are traditionally perceived to be such assets as well as other governments' bonds. Considering the present economic turmoil, I have doubts that this theory will hold. I don't know about negative beta :).

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  Pete
5
Pete, USA
 

Why US Treasury Bills can no Longer be Considered Risk-free

Indeed Anna, US treasury bills or government bonds were always considered to be risk-free. The reason behind this was originally that the US economy was so strong and the country so big and solid.
In the last decades this changed and the reason became that we all agreed that we would consider the risk to be zero (even if we had some doubts already).
In the last couple of years we still kept to this agreement even if we knew things had changed, because nobody was willing to accept the consequence (a system crisis).
Now that we had a crisis it is obvious that the old paradigm no longer holds: US Treasury bills can no longer be considered risk-free.

 

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More on Capital Asset Pricing Model
Summary Discussion Topics
topic Can Beta of a Stock be 0? And can Beta be Negative?
topic What is Beta? Explanation and a Few Remarks
topic Application of Capital Asset Pricing Model in Pakistan
topic Raw Beta vs Adjusted Beta
topic How to Use CAPM for Project Analysis?
topic Calculating Beta of Portfolio after Portfolio Change
topic Question - CAPM and Beta
topic CAPM is Irrelevant to Use
topic CAPM usage by Fund Managers
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topic Calculating Company Beta
topic CAPM Model and Calculating the Inflation Rate?
topic Concept of Marginality and CAPM
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topic Testing CAPM with Individual Stock Returns
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Knowledge Center

Capital Asset Pricing Model


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