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(a) Aisya currently holds a portfolio of Malaysian stocks worth about RM1,000,000. She has been viewing quite a number of YouTube videos by renowned economists
(a) Aisya currently holds a portfolio of Malaysian stocks worth about RM1,000,000. She has been viewing quite a number of YouTube videos by renowned economists and investors who are predicting a severe market decline very soon. Concerned over the possibility of a drop in the value of her stock investments, she is considering taking an appropriate short position on KLCI futures to fully hedge her portfolio. Aisya mentioned this intention of hers to her close friend Jannah, to which Jannah commented: If you think the market is going to fall, why don't you just sell all your stocks now, and buy them back later, why bother with stock index futures? Assuming you are in Aisya's position, provide a reasoned response to what Jannah said, defending the strategy of using KLCI futures to hedge the stock portfolio
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