180k views
2 votes
A stock with a Beta of 1.20 is expected to:

a. rise faster than the market is an up market
b. perform in line with the market
c. go down less in a falling market
d. should be listed second in alphabetical order in a portfolio

1 Answer

2 votes

Final answer:

A stock with a Beta of 1.20 is expected to rise faster than the market in an up market due to its higher volatility. However, this also means it might fall more in a down market, reflecting its riskier profile.

Step-by-step explanation:

The stock's Beta is a measure of its volatility in comparison to the market as a whole, with the market typically having a Beta of 1. A stock with a Beta higher than 1 is expected to experience greater volatility than the market. Therefore, a stock with a Beta of 1.20 will likely rise faster than the market during an up market and potentially fall more during a down market. It indicates a higher level of risk but also the potential for higher returns in a favorable market condition.

However, the actual performance can be influenced by many factors, including market trends and the random walk with a trend nature of stock prices, which means that stock prices are unpredictable in the short term even though they may exhibit a general upward trend over time.

User Const
by
7.9k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.