November 29, 2015

Homework Help: Coporate finance

Posted by Anonymous on Monday, August 2, 2010 at 9:08pm.

Consider the following two, completely separate, economies. The expected return violatility of all stocks in both economies is the same. In the first economy, all stocks move together-in good times all prices rise together and in bad times they all fall together. In the second economy, stock returns are independent ľone stock increasing in price has no effect on the price of other stocks. Assuming you are risk ľaverse and you could choose one of the two economies in which to invest, which one would you choose explain.

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