Consider two stocks, A and B, whose returns in a boom and a recession are given below. Stock A: recession (-15%), boom (+20%). Stock B: recession (+10%), boom (-2%). Suppose that there is a 10% chance...





Consider two stocks, A and B, whose returns in a boom and a recession are given  below. Stock A: recession (-15%), boom (+20%). Stock B: recession (+10%), boom (-2%). Suppose that there is a 10% chance of a recession next year. How would you allocate money between these two stocks so as to minimize your risk?






Jun 07, 2022
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