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 tend to have high Betas because their earnings are not stable and are highly dependent on the fluctuations in the overall economy. This makes their stocks more sensitive to market movements, resulting in a higher Beta coefficient.

Which of the Following Statements Best Explains the Fact That