Tuesday, July 14, 2009

High Correlations of Asset Classes In Bad Markets

A video interview of Ken French of the Fama/French Forum and Professor of Finance at the Tuck Business School at Dartmouth College about asset class correlations and diversification in bad and volatile markets.

Upshot is that without diversification in bad markets, returns would be worse. High correlation is an artifact of the extreme movements of the market component part of the investments as opposed to the movement of the individual characteristic components of the assets.

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