Explanation:
High beta assets are indeed assets that tend to go up when the market goes up and go down when the market goes down. The beta coefficient measures the volatility of an asset in relation to the overall market. A high positive beta, typically greater than 1, indicates that the asset is more volatile than the market. This means that if the market increases or decreases, the price of the high beta asset will increase or decrease to a greater extent. This characteristic makes high beta assets potentially more profitable, but also riskier, as they are more susceptible to market fluctuations.
Choice A is incorrect. High beta assets do not have lower volatility or systemic risk compared to the market. In fact, they are more volatile and tend to move more rapidly in response to market changes due to their high sensitivity.
Choice C is incorrect. This statement describes assets with a negative beta, not a high positive beta. Assets with a negative beta tend to move in the opposite direction of the market.
Choice D is incorrect. High beta assets are not less volatile than the market portfolio; rather, they are more volatile due to their higher sensitivity to market movements.
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Q.3018 Which of the following best describes assets with the high positive beta?
A
High beta assets have lower volatility, or systemic risk, in comparison to the market and, therefore, tend to move slowly in response to market changes.
B
High beta assets are assets that tend to go up when the market goes up and goes down when the market goes down.
C
High beta assets are assets that have a tendency of going down when the market goes up and moves up as the market goes down.
D
High beta assets are assets whose prices are less volatile than the market portfolio.