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:

Athletic Contests

Competitive physical activities or sports where participants aim to display superior strength, speed, or skill.

Trade and Economic Exchanges

The act of buying, selling, or exchanging goods and services between people or countries, facilitating the distribution of resources, creation of wealth, and economic interdependence.

Self-fulfilling Prophecy

A forecast that, whether directly or indirectly, ensures its own fulfillment through a positive loop between belief and action.

Social Trap

Situations where individuals or groups act against their long-term communal interests by pursuing short-term personal gains.