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.