Stocks That Rise and Fall in Value in Tandem with the Economy

question 295

True/False

Stocks that rise and fall in value in tandem with the economy as a whole are said to be countercyclical.

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Definitions:

Security Market Line

A representation in financial markets of the relationship between risk and expected return, used in the Capital Asset Pricing Model.

Overpriced Security

A security trading at a price believed to be higher than its theoretical value or intrinsic worth.

Expected Market Rate

The anticipated rate of return on an investment as predicted by investors based on historical market data and trends.

Abnormal Return

Return on a stock beyond what would be predicted by market movements alone. Cumulative abnormal return (CAR) is the total abnormal return for the period surrounding an announcement or the release of information.