If percentage changes in the value of a stock are iid with mean 0, then how should we predict the change tomorrow if the change today was a 3% increase? How would the prediction change if the value today decreased by 2%?
An insurance company has studied the costs from covering auto accidents. Its policies offer separate coverage for personal injury and damage to property. It has found that the amount paid in these two categories is highly positively correlated. What is the impact of this dependence on the total amount paid for accident claims?
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