more risky
less risky
pessimistic
optimistic
Answer is Right!
Answer is Wrong!
The correct answer is: A. more risky.
A high book-to-market ratio indicates that a stock is trading at a low price relative to its book value. This can be a sign that the stock is undervalued, but it can also be a sign that the stock is risky. A stock with a high book-to-market ratio is more likely to be volatile, and it is more likely to lose value if the company’s performance declines.
Here is a brief explanation of each option:
- Option A: More risky. A high book-to-market ratio indicates that a stock is trading at a low price relative to its book value. This can be a sign that the stock is undervalued, but it can also be a sign that the stock is risky. A stock with a high book-to-market ratio is more likely to be volatile, and it is more likely to lose value if the company’s performance declines.
- Option B: Less risky. A low book-to-market ratio indicates that a stock is trading at a high price relative to its book value. This can be a sign that the stock is overvalued, but it can also be a sign that the stock is less risky. A stock with a low book-to-market ratio is less likely to be volatile, and it is less likely to lose value if the company’s performance declines.
- Option C: Pessimistic. A high book-to-market ratio does not necessarily indicate that investors are pessimistic about the company. In fact, a high book-to-market ratio can be a sign that investors are optimistic about the company’s future prospects.
- Option D: Optimistic. A high book-to-market ratio does not necessarily indicate that investors are optimistic about the company. In fact, a high book-to-market ratio can be a sign that investors are pessimistic about the company’s future prospects.