A stock with a Beta of 1.20 is expected to:

A stock with a Beta of 1.20 is expected to:

• A. Rise faster than the market in an up market
• B. Perform in line with the market
• C. Go down less in a falling market
• D. Be listed second in alphabetical order in a portfolio

Answer: (A)

A stock with a Beta of 1.20 indicates that it is more volatile than the overall market. In finance, Beta is a measure of a stock's risk in relation to the market; specifically, it shows how much the stock price is expected to change in response to market movements. A Beta of 1.20 suggests that the stock is expected to rise by approximately 20% more than the market's average increase during up markets. Therefore, when the market is performing well and rising, this stock is expected to rise at an even faster rate, reflecting its higher sensitivity to market changes. This characteristic of having a Beta greater than 1 aligns directly with the option stating that the stock will rise faster than the market in an up market. Investors often seek such stocks to leverage bullish market conditions, anticipating greater returns compared to stocks with a Beta of 1 or less.

A stock with a Beta of 1.20 indicates that it is more volatile than the overall market. In finance, Beta is a measure of a stock's risk in relation to the market; specifically, it shows how much the stock price is expected to change in response to market movements. A Beta of 1.20 suggests that the stock is expected to rise by approximately 20% more than the market's average increase during up markets. Therefore, when the market is performing well and rising, this stock is expected to rise at an even faster rate, reflecting its higher sensitivity to market changes.

This characteristic of having a Beta greater than 1 aligns directly with the option stating that the stock will rise faster than the market in an up market. Investors often seek such stocks to leverage bullish market conditions, anticipating greater returns compared to stocks with a Beta of 1 or less.