A firm in an industry that is very sensitive to the business cycle will likely have a stock beta
A) greater than 1.0.
B) equal to 1.0.
C) less than 1.0 but greater than 0.0.
D) equal to or less than 0.0.
E) There is no relationship between beta and sensitivity to the business cycle.

Question

Quizplus · Accepted Answer

A stock beta greater than 1.0 indicates that the stock is more volatile than the market, which is typical for firms in industries sensitive to the business cycle. These firms' revenues and profits are highly correlated with economic conditions, leading to greater fluctuations in their stock prices relative to the overall market.

A Firm in an Industry That Is Very Sensitive to the Business