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You happen to believe that the market downturn is overdone, and that the economy will rebound strongly. if the capm holds, what does this imply about your portfolio allocation?

Sagot :

If the CAMP holds, these days in particular, international stocks are too volatile to hold in a diversified portfolio.

As the economic downturn has caused many firms to streamline their production activities, and focusing on a single product line, the Capital Asset Pricing Model (CAPM) is less useful than it once was, when firms had more diversified lines of business.

In order to test whether the alpha of any portfolio is statistically different from zero, one test of the CAPM is necessary. Thus, with the available stock returns data, the regression would be run.

Hence, these days international stocks are too volatile to hold in a diversified portfolio.

To learn more about CAPM here:

https://brainly.com/question/15548553

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