Products & Their RisksQuestion 159 of 398
An investor who wants a portfolio that is LESS volatile than the overall market should favor stocks with:
a.A beta below 1.0
b.A beta above 1.0
c.A beta exactly equal to 1.0
d.A negative dividend yield
Explanation
Beta measures volatility relative to the market, which has a beta of 1.0. Stocks with a beta below 1.0 tend to move less than the market, so a portfolio built from low-beta stocks is generally less volatile and carries less systematic risk. High-beta stocks (above 1.0) amplify market swings.
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