What is implied when an asset has a negative beta value?
A)It implies that the asset can't exist because negative beta assets are theoretically impossible.
B)It implies that the asset is a necessary component for achieving a fully diversified portfolio.
C)It implies that the asset is a risk-reducing property when added to a portfolio.
D)It implies that the asset has a higher expected return.

Question

Quizplus · Accepted Answer

A negative beta value implies that the asset has a negative correlation with the market, meaning that it moves in the opposite direction of the overall market. This can be a risk-reducing property when added to a portfolio as it can offset losses from other assets in the portfolio during market downturns. Negative beta assets are not impossible, but they are relatively rare.

What Is Implied When an Asset Has a Negative Beta