SIE Exam Question 903: Answer and Explanation

Question: 903

All but which of the following are correct regarding counter-cyclical stocks?

• A. They perform better during economic downturns.
• B. They are negatively correlated to the overall state of the economy.
• C. Examples of counter-cyclical stocks include airlines and hotels.
• D. They outperform during the contraction phase of the business cycle.

Correct Answer: C

Explanation:

Counter-cyclical stocks perform better during economic downturns because they are negatively correlated to the overall state of the economy. They outperform during the contraction phase of the business cycle. Examples of counter-cyclical stocks include debt collectors, discount retailers, and alcoholic beverage manufacturers.