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when the overall market is down by 10%, investors with portfolios a defensive stocks will probably...

when the overall market is down by 10%, investors with portfolios a defensive stocks will probably have:
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Answer #1

When the overall market is down by 10%, investors with portfolios a defensive stocks will probably have their stocks down by less than 10% because the Beta or Systematic risk of portfolio comprising of defensive stocks is less than the beta or Systematic risk of the overall market. For eg: By default, market beta is assumed tobe 1. Now if a portfolio has defensive stocks, its beta willl be less than 1, say 0.80. Hence if market falls by 1% the portfolio of defensive stock will fall by 0.8%. Hence when market is down by 10%, the portfolio of defensive stock will be down by 8% i.e., less than 10%.

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