The correct answer is: C. fundamental betas.
Fundamental betas are betas that are constantly adjusted to reflect changes in capital structure and firms operations. They are calculated using a variety of factors, including the company’s financial statements, its industry, and the overall economy. Fundamental betas are considered to be more accurate than historical betas, which are based on past data.
Historical betas are calculated using a company’s stock price and the market’s stock price over a period of time. However, historical betas can be misleading because they do not take into account changes in a company’s capital structure or operations. For example, if a company takes on more debt, its beta will increase. This is because the company will be more sensitive to changes in interest rates.
Fundamental betas are calculated using a variety of factors, including the company’s financial statements, its industry, and the overall economy. This makes them more accurate than historical betas. Fundamental betas can be used to estimate a company’s future stock price volatility. They can also be used to calculate a company’s cost of capital.
A. fundamental structure is not a valid option.
B. fundamental adjustment is not a valid option.
D. fundamental operations is not a valid option.