NACVA Exam CVA Topic 5 Question 77 Discussion

Actual exam question for NACVA's CVA exam

Question #: 77
Topic #: 5

[All CVA Questions]

It is possible (although not very common) for a security to have a negative beta (i.e. a beta less than zero). Such a beta would indicate that:

AIt is the result of aggressive securities

BBetas for small and publicly traded companies are often unreliable

CThe returns of these securities are countercyclical to the returns of the board investment market index.

DRisk-free return would be greater

Show Suggested Answer

Suggested Answer: D

by Merlyn at Dec 08, 2023, 10:53 PM

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Shawnda

2 months ago

Woah, negative beta? That's like the Bizarro World of investing. Definitely C, the counterCYCLICAL returns.

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Delmy

7 days ago

User 4: So, C would be the correct answer then.

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Kelvin

28 days ago

User 3: I think it means the returns move in the opposite direction of the market.

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Sommer

1 months ago

User 2: Definitely, it's like the opposite of what you would expect.

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Josue

2 months ago

User 1: Negative beta is rare but interesting.

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Fabiola

2 months ago

So, would that mean option C is the correct answer?

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Gary

2 months ago

Ha! Imagine a security with a negative beta. That would be like investing in a perpetual motion machine. Gotta go with C on this one.

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Bettye

22 days ago

I think it's because the risk-free return would be greater with a negative beta.

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Bettye

23 days ago

I agree, a negative beta would mean the returns are countercyclical to the market index.

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Lourdes

24 days ago

I think it's because the risk-free return would be greater with a negative beta.

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Lourdes

1 months ago

I agree, a negative beta would mean the returns are countercyclical to the market index.

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Josphine

2 months ago

That's right, it indicates countercyclical returns compared to the market index.

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Gerald

2 months ago

I'm not sure about the specifics, but I know that negative betas are rare. Probably option C is the best choice here.

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Gabriele

27 days ago

Yes, that's correct. They provide a hedge against market downturns.

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Carman

2 months ago

So, negative beta securities would perform well when the market is down?

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Olga

2 months ago

Agreed, negative betas are rare but they do exist. It means the security moves opposite to the market.

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Svetlana

2 months ago

I think option C is correct. Negative betas indicate countercyclical returns.

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Cherry

2 months ago

Option C seems to be the correct answer. A negative beta indicates that the security's returns move in the opposite direction of the overall market.

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Laquita

3 months ago

I think a negative beta means the security moves opposite to the market.

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