You would expect the beta of cyclical industries to be ________ and the beta of defensive industries to be ________.
A) greater than 1; less than 1
B) less than 1; less than 1
C) less than 1; greater than 1
D) greater than 1; greater than 1

Question

Quizplus · Accepted Answer

Cyclical industries have a higher beta, indicating greater volatility in earnings and stock prices, while defensive industries tend to have lower beta, indicating less volatility. Since beta measures the volatility of a stock or portfolio in relation to the market, a beta greater than 1 means that the stock or portfolio is more volatile than the market. A beta less than 1 indicates that it is less volatile than the market.

You Would Expect the Beta of Cyclical Industries to Be