Ace the Chartered Institute of Stockbrokers Test 2025 – Trade Your Way to Success!

A high beta value indicates that an investment has a higher correlation with market risks, signifying that it tends to move more dramatically in response to market fluctuations compared to the overall market. Specifically, a beta greater than 1 implies that if the market moves up or down, the investment is likely to move in the same direction but by a greater percentage. This characteristic makes high-beta investments potentially more volatile, but also presents opportunities for higher returns when the market performs well.

In contrast, a lower beta suggests that the investment is less sensitive to market swings, indicating lower volatility and risk. Additionally, a high beta does not guarantee high returns, as fluctuations can also lead to significant losses if the market moves unfavorably. Illiquidity refers to how easily an asset can be bought or sold without affecting its price, which is unrelated to beta and indicates market behavior, not correlation with market risks.