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Why Should an Investor Invest in a Negative-Beta Stock Knowing

question 33

Essay

Why should an investor invest in a negative-beta stock knowing that it will have an expected return lower than the risk-free rate?


Definitions:

Continuous Reinforcement

A learning theory concept where a behavior is reinforced every time it is exhibited, leading to fast learning but rapid extinction without reinforcement.

Desired Behaviour

A specific set of actions or reactions that an organization or individual aims to elicit from another party, often through reinforcement or incentives.

Reward

A benefit, often in the form of compensation, recognition, or appreciation, given to individuals for their performance or achievements.

Intermittent Reinforcement

A conditioning schedule in which rewards or punishments are given out at irregular intervals, making a behavior more resistant to extinction.

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