Suppose there is positive risk-return trade off

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Reference no: EM131909159

1. Suppose there is a positive risk-return tradeoff. That is, expected excess market returns increase with conditional market variance. When stock market variance increases unexpectedly, would the stock market price increases, decreases, or stay put?

2. What is the relation between stock prices and expected future stock returns?

3. When the discount rates increase, would stock prices increase, decrease, or stay put?

Reference no: EM131909159

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