A classic example of a negative beta investment is the stock of a:
A)steel mill because the industry is subject to intense international competition.
B)gold mining company because it's profitability runs opposite to the state of the economy.
C)financial services company because it's in the stock business itself.
D)company in the defense industry because war is always a possibility.

Question

Quizplus · Accepted Answer

A negative beta investment is one whose returns are negatively correlated with the overall market. A gold mining company is an example of a negative beta investment because during times of economic growth and stability, investors tend to move away from safe-haven investments such as gold, causing the price of gold to decline. Conversely, during times of economic and political uncertainty, investors tend to flock to safe-haven investments, causing the price of gold to rise. This inverse relationship with the market makes gold mining company a negative beta investment.

A Classic Example of a Negative Beta Investment Is the Stock