Please help with the logic behind this question seventeen Where answer is B positive correlation between future consumptions outcome and equity return However As per our understanding, there is negative correlation between two that is in good times, the value of consumption utility is low (MV of Future consumption/MV of Current consumption ..the current consumption is high and future consumpion is low ) and return on assets which are poor hedge like equity is high
in case of bad time, this value of ratio of intertemporal subsitition rate is high (as value of future consumption is high and current consumption is low) and return on poor hedge instruments are low.There fore there should be a negative correlation.
why in this quest there is positive corrleation
Answered multiple times earlier. Please look up.