>> Well, I think one reason, there may be many reasons,
it's not just that this theory doesn't tell you why.
I'm just adding some thoughts on that.
One reason why Apple Computer might be a high beta star,
is that it invests in projects that are iffy,
that nobody's done before.
And their success depends on the state of the economy.
So, if they launch a new iPhone at a time of a severe recession,
they're not going to do well.
And the other thing that can make for
a high beta stock is that the company borrows a lot of money.
And then they're playing on the edge, because they have to make a lot
of money or they'll go bankrupt cause they borrowed so much.
Apple is not in that category, Apple has not borrowed a lot of money.
It has, in fact, a lot of savings.
That’s something that brings its beta down.
But Apple is such a lively company, and so
connected with what happens that their beta is still 1.5.
>> I see.
And so then a counterexample to this might be if there's a very low beta stock,
so that would kind of look like either a lower slope or even a negative slope.
>> Right, right. >> Okay.
>> So for example, gold might in many cases be a negative beta stock.
Why is that?
Because when the stock market crashes people panic and they get upset,
and they want to hold something very safe.
At least gold it’s always safe in one sense, it stays gold.
No matter what happens.
It’s also something that you can run with.
If you think that you're going to be a refugee,
I want something I can stash in my purse and just get out of here.
Gold has that aspect.
So it's some psychological effect, that at least in some time periods,
it looks like negative beta asset.