Find which economy would choose to invest in

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Question 1: You are a risk averse investor who is considering investment in one of two economies. The expected return and volatility of all stocks in both economies are the same. However, it is also known that in the first economy, all stocks move together - in good times all prices rise together and during bad times they all fall together. On the other hand, in the second economy, stock returns are independent. Explain which economy you would choose to invest in?

Reference no: EM132523091

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