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There are few, if any, real companies with negative betas. But suppose you found one with = .25. You have $1 million invested in a
There are few, if any, real companies with negative betas. But suppose you found one with = .25.
You have $1 million invested in a well-diversified portfolio of stocks. Now you receive an additional $20,000 bequest. Which of the following actions will yield the safest overall portfolio return? (i) Invest $20,000 in Treasury bills (which have = 0). (ii) Invest $20,000 in stocks with = 1. (iii) Invest $20,000 in the stock with = .25. Explain your answer.
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