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?

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Definitions:

Production Possibilities Curve

The Production Possibilities Curve (PPC) is a graphical representation that shows the maximum quantity of two goods or services that can be produced with limited resources.

Future Location

Refers to a place where something is expected or planned to be situated at a later time.

Economic Generalizations

General statements that summarize common relationships or patterns within an economy, often derived from empirical observations and economic theory.