Which of the following statements best explains the fact that cyclical firms tend to have high Betas?
A)their earnings are not stable
B)their stocks are overpriced
C)their earnings are less diversifiable
D)their profit margins are small

Question

Quizplus · Accepted Answer

Cyclical firms are highly dependent on the business cycle and their earnings tend to fluctuate with the economy. This means that their earnings are not stable and can experience significant swings, leading to higher risk and a higher Beta.

Which of the Following Statements Best Explains the Fact That