Question

A stock with a beta greater than 1.0 has returns that are​ ________ volatile than the​ market, and a stock with a beta of less than 1.0 exhibits returns which are​ ________ volatile than those of the market portfolio.

Answer 1

more, less

Explanation:

Beta is a measure of volatility. It is used in calculating the cost of equity using the CAPM (Capital Asset Pricing Model formula).

A beta greater than 1 signifies that the returns from an investment is expected to be higher than the returns from the general market as the risk inherent in that investment is higher.

Similar to the economic concepts of elasticity, a change in one variable (in this case, beta of the stock) setting about a greater than proportionate change in another variable (returns from the stock).

Thus, a stock with beta of less than 1, will be less volatile than the market.

I hope this helps you understand the concept better.