Asset a and asset b have the same average rate of return, Ask an Expert

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Asset A and Asset B have the same average rate of return, but A has a distribution of returns which is normal, while B has a positively skewed distribution of returns.

a) What difference would an investor see between these two assets when observing them in the market? (i.e. how would their pattern of returns be different over time)

b) Suppose you did not know what the distributions looked like, but assumed they were both assets with normal distributions. If you observed both of them over a short period of history when there were no extreme returns, which asset would appear to have the higher returns on average?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92083242

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