A value manager's portfolio would be expected to:

A value manager's portfolio would be expected to:

• A. have a yield lower than the market
• B. have a PE ratio higher than the market
• C. have a Beta equal to the market or less
• D. sell at a premium to the S&P

Answer: (C)

Beta shows how much a portfolio’s returns move with the overall market. A value manager aims for investments that are attractive on fundamentals but not overly risky to market swings. Because these stocks are typically more stable and less driven by rapid market trends, the overall portfolio is expected to have a beta around the market or lower. In other words, the portfolio should not be more volatile than the market; it should carry equal or less systematic risk. This is why the best choice is that the portfolio’s beta is equal to or less than the market. Values stocks often have steady cash flows and lower price aspirations, which tends to keep volatility in check. As for the other considerations: yield isn’t fixed and can vary, and value stocks can offer higher yields than the market, so a lower yield isn’t a defining trait. A higher P/E relative to the market would clash with value investing, which looks for cheaper valuations. Finally, value stocks typically trade at discounts to the market rather than at a premium, since they are sought for undervaluation rather than overvaluation.

Beta shows how much a portfolio’s returns move with the overall market. A value manager aims for investments that are attractive on fundamentals but not overly risky to market swings. Because these stocks are typically more stable and less driven by rapid market trends, the overall portfolio is expected to have a beta around the market or lower. In other words, the portfolio should not be more volatile than the market; it should carry equal or less systematic risk.

This is why the best choice is that the portfolio’s beta is equal to or less than the market. Values stocks often have steady cash flows and lower price aspirations, which tends to keep volatility in check.

As for the other considerations: yield isn’t fixed and can vary, and value stocks can offer higher yields than the market, so a lower yield isn’t a defining trait. A higher P/E relative to the market would clash with value investing, which looks for cheaper valuations. Finally, value stocks typically trade at discounts to the market rather than at a premium, since they are sought for undervaluation rather than overvaluation.