Why would investors looking to have a diversified stock portfolio view a negative covariance in stocks as a good thing? A negative covariance means the stocks would not behave the same way, which would hedge against significant loss. A negative covariance means investors can reinvest in the stocks at a lower price. Investors don't want a negative covariance; they want a positive covariance to maximize profits. None of these answers is correct.
Why would investors looking to have a diversified stock portfolio view a negative covariance in stocks as a good thing? A negative covariance means the stocks would not behave the same way, which would hedge against significant loss. A negative covariance means investors can reinvest in the stocks at a lower price. Investors don't want a negative covariance; they want a positive covariance to maximize profits. None of these answers is correct.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Why would investors looking to have a diversified stock portfolio view a negative covariance in stocks as a good thing? A negative covariance means the stocks would not behave the same way, which would hedge against significant loss. A negative covariance means investors can reinvest in the stocks at a lower price. Investors don't want a negative covariance; they want a positive covariance to maximize profits. None of these answers is correct.
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