Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns?) Medium-beta stocks All stocks affected the same, regardless of beta Low-beta stocks High-beta stocks

Question

Chace Chandler

Business

31 August, 01:39

Which kind of stock is most affected by changes in risk aversion? (In other words, which stocks see the biggest change in their required returns?) Medium-beta stocks All stocks affected the same, regardless of beta Low-beta stocks High-beta stocks

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Answers (1)

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Uriel Warren · Answer 1

High-beta stocks

Explanation:

High beta stocks are the type of stocks which are highly correlated with the top stock market performers such as, S&P 500. As, these stock are correlated, they are mostly affected by the risk aversion because they are correlated at a high magnitude level so a small change can affect the required returns and usually underperform in bearish market.