Risk Reward Behavior and Stock Portfolio DiversificationYou are a risk-averse investor who is considering investing of two economies. The expected return and volatility of stocks in both economies is the same. In the first economy all stocks move together – in good times all prices rise together and in bad times they all fall together. In the second economy stock returns are independent – one stock increasing in price has no effect on the prices of the stocks. Which economy you chose to invest in?Explain.
