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> I liked it better when it was uncorrelated. Is there a theorem that says returns never stay uncorrelated, because everyone want to diversify?
by jefftk 4y ago
> I liked it better when it was uncorrelated.
Is there a theorem that says returns never stay uncorrelated, because everyone want to diversify?
- FabHK 4y agoWell, everyone wants to diversify, so everyone is willing to pay a premium for assets that are uncorrelated to the market, thus depressing their expected return. That's one of the basic insights of the CAPM. But that effect should not affect the correlation.