Which type of company do you think will have a higher beta? A fast food chain or a cruise ship firm?

Question

Which type of company do you think will have a higher beta? A fast food chain or a cruise ship firm?

Answer 1

As the more defensive of the two industries, I would be inclined to think that a fast food chain will have a lower beta than a cruise line. This is borne out by current examples of each:

McDonald's beta = 1.04

Yum Brands' beta = 1.30

Carnival Cruise Lines' beta = 1.48

Royal Caribbean Lines' = 1.68.

Of course, there will be variances within an industry. For example, Procter & Gamble's beta is twice that of close competitor Colgate Palmolive (although both are less than 1.0).