Why would stock for a high-end store with expensive clothing be considered risky in a recession?
A) Consumers demand cheaper clothes in times of recession, and that company would be expected to make lower profits.
B) Consumers do not buy stock when recessions occur.
C) High-end clothing store stocks have low covariance with the market.
D) Stocks from such companies depend heavily on oil prices.

Question

Quizplus · Accepted Answer

During a recession, consumers tend to cut back on spending and prioritize necessities over luxury items, including expensive clothing. As a result, the demand for high-end clothing decreases, causing the company's profits to decline. This makes the stock more risky as it is dependent on consumer discretionary spending, which decreases during a recession.

Why Would Stock for a High-End Store with Expensive Clothing