Which one of the following is a correct ranking of securities based on their vol

Question

Which one of the following is a correct ranking of securities based on their volatility over the period of 1926 to 2014? Rank from highest to lowest.

long-term government bonds, long-term corporate bonds, small-company stocks

small-company stocks, long-term corporate bonds, large-company stocks

long-term corporate bonds, large-company stocks, U.S. Treasury bills

large-company stocks, U.S. Treasury bills, long-term government bonds

small-company stocks, large-company stocks, long-term corporate bonds

Explanation / Answer

b) small-company stocks, long-term corporate bonds, large-company stocks

Small-company stocks were extremely volatile as per the changing scenario of the economy. Be it a period of boom or recession, such stocks used to face extreme volatility because of the factors on which they were based. Long term corporate bonds were based on the interest rates. They used to show their volatility as and when interest rates used to rise or fall slowly or sharply. Large company stocks are majorly linked with the company's financial position, insider information and the financial standing in the corporate world. They are the lowest one in the form of ranking as per volatility.

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