A firm is said to be countercyclical if its returns:
A) continue to decrease, year after year.
B) continue to increase, year after year.
C) outperform when most stocks do poorly.
D) are negative in real terms.

Question

Quizplus · Accepted Answer

A countercyclical firm is one that tends to perform well during economic downturns, when most other stocks are doing poorly. Therefore, its returns would outperform when most stocks do poorly. Options A and B are incorrect because they describe trends in returns that are not specific to countercyclical firms. Option D is incorrect because it only describes a characteristic of negative returns, not countercyclical returns specifically.

A Firm Is Said to Be Countercyclical If Its Returns