Question

Beta may be used to classify stocks into which of the two following categories?

A. income stocks and growth stocks
		B. dividend paying stocks and non-dividend paying stocks
		C. stocks listed on the New York Stock Exchange and those traded over-the-counter
		D. defensive stocks and aggressive stocks
		E. none of the above

Answer 1

beta represent relationship between stock return & market return

If beta is greater than 1, then it implies that stock will return more than the market if market increases and same way will decline more than the market if market declines.

for example, if beta = 1.5, and market increases by 5%, then stock will increase by 5% x 1.5 = 7.5% and same way decline

If beta is less than 1, then it implies that stock will return less than the market if market increases & vice-versa

so beta > 1 are called aggressive stocks & beta < 1 are called defensive stocks.

ANSWER : D : defensive stocks ane aggressive stocks (Thumbs up please)