Recession Proof

AAA

DEFINITION of 'Recession Proof'

A term used to describe an asset, company, industry or other entity that is believed to be economically resistant to the outcomes of a recession. Oftentimes, recession-proof stocks are added to many investment portfolios during times of economic decline, which may be the onset of a recession. Securities that are believed to be recession proof often have a negative beta values, which would indicate an inverse relationship to the greater market.

INVESTOPEDIA EXPLAINS 'Recession Proof'

Although many items have been labeled as recession proof, very few turn out to be so. Quite often, the long-reaching consequences of a recessionary period are too much for even the most recession-proof firms, assets etc. to withstand.

Securities that are believed to be recession proof often have negative beta values, which indicate an inverse relationship to the greater market. It was once believed that gold and gold stocks, for example, were recession proof due to gold's negative beta value. However this belief has been disproved over the long run.

RELATED TERMS
  1. Global Recession

    An extended period of economic decline around the world. The ...
  2. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  3. Economic Tsunami

    A term used to describe a set of economic forces that are propelled ...
  4. Green Shoots

    A term used to describe signs of economic recovery or positive ...
  5. Recession

    A significant decline in activity across the economy, lasting ...
  6. Beta

    A measure of the volatility, or systematic risk, of a security ...
RELATED FAQS
  1. What does it mean if something is described as "recession-proof?"

    A recession occurs when there is a decline in the gross domestic product, or GDP, over two or more consecutive quarters. ... Read Full Answer >>
  2. Why does unemployment tend to rise during a recession?

    A recession has a domino effect, where increased unemployment leads to less growth and a drop in consumer spending, affecting ... Read Full Answer >>
  3. What techniques are most useful for hedging exposure to the banking sector?

    The banking sector moves in the same direction as the broader market, but its volatility is much lower. The sector's stability ... Read Full Answer >>
  4. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  5. During what stage of the economic cycle should I invest in the drugs sector?

    Invest in the drugs sector during the expansionary stage of the economic cycle, when the broader market is rising. The absolute ... Read Full Answer >>
  6. What is backtesting in Value at Risk (VaR)?

    The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >>
Related Articles
  1. Investing

    The Ups And Downs Of Investing In Cyclical Stocks

    This strategy can be profitable but only if you know when to dump these stocks.
  2. Budgeting

    5 Things You Shouldn't Do During A Recession

    These tips can help you avoid financial risk, and are especially important during an economic slowdown.
  3. Fundamental Analysis

    Where's The Market Headed Now?

    Whether up, down or sideways, learn about some of the factors that drive stock market moves.
  4. Bonds & Fixed Income

    Tips For Recession-Proofing Your Portfolio

    Find out what to do when the sun sets on a burgeoning market.
  5. Active Trading Fundamentals

    Recession: What Does It Mean To Investors?

    Understanding the business cycle and your own investment style can help you cope with an economic decline.
  6. Mutual Funds & ETFs

    Survival Tips For A Stormy Market

    Learn which stocks to watch and which to avoid when the Dow starts to sink.
  7. Fundamental Analysis

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  8. Mutual Funds & ETFs

    U.S. Investors Are Seeking Opportunities Overseas

    A latest analysis leads to believe that many investors are applying a spring cleaning approach to their portfolios, rebalancing as the 1st quarter ended.
  9. Investing

    Three Portfolio Moves To Consider Now

    What portfolio moves should you consider making as the 2nd quarter kicks off? Before we focus on the future, let’s first reflect on the 1st Q surprises.
  10. Investing Basics

    Manage Investments And Modern Portfolio Theory

    Modern Portfolio Theory suggests a static allocation which could be detrimental in declining markets, making it necessary for continuous risk assessment. Downside risk protection may not be the ...

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center