calculate expected returns for segmented market expected, returns, market

bchadwick

Assuming market A is 60% integrated with global market, and it has 50% correlation with global market

so we
1. calculate its Expected return using 50% as correlation to get R1 (assuming full integrated)
2. calculate its Expected return using 1 as correlation to get R2 (assuming full segmented)

Then R1*06 + R2*0.4

Question: why correlation is 1 when assuming it is fully segmented?

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