What characterizes defensive stocks in the financial market?

Defensive stocks are generally characterized by their ability to maintain stable prices during economic downturns. This stability is due to the nature of the companies that typically issue these stocks. Defensive stocks belong to industries that produce essential goods and services—such as utilities, healthcare, and consumer staples—that remain in demand regardless of the economic climate. As a result, investors tend to flock to these stocks when the economy is struggling, providing a cushion against volatility and potential losses in other sectors.

In contrast, the other choices do not accurately describe defensive stocks. While they typically do not increase significantly in value during economic booms, their defining quality is their resilience during economic declines. Furthermore, defensive stocks are not defined by a technology focus; in fact, many technology stocks can be more volatile and do not fit the defensive category. Similarly, defensive stocks are usually not classified as high-risk investments; they tend to be seen as safer options in an investor's portfolio. This stability and lower risk profile are key characteristics that distinguish defensive stocks from more aggressive investments.