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Question from Portfolio Concepts LOS 64
The last LOS contains the concept that:
In recessions, an investor who is dependent on salary from income, avoids cyclical stocks (causing decreasing prices, higher risk premiums) and purchases counter-cyclical stocks (bidding prices, lower risk premiums).
Whereas, an independent wealthy investor faces no systematic risk due to recessions and purchases cyclical stocks with high risk premiums as his salary is not dependent on income (or for that matter GDP fluctuations).
The questions it that is this concept related to behavioral financial decisions which is common among such investors?
Secondly, when stock prices go down for cyclical stocks, why do risk premiums go higher? Is it because an upside potential exists and expected return is higher for future when GDP growth revives? |
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发表于 2011-7-11 19:41
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