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Few investors would give up diversification for potentially good profits on stocks that have been dropping like a stone. Also look at this from the company's p
by josephschmoe 12y ago
Few investors would give up diversification for potentially good profits on stocks that have been dropping like a stone.
Also look at this from the company's perspective: companies, wanting high evaluations so they can sell off their own stock at a profit, might try to actively push themselves up the "moral index"/"popularity index" - that's a win for the common folk.
- alphagenerator 12y agoYou're incorrect with regard to diversification. You can go short the good company and long equivalent bad company (or a basket of securities containing a bad company) and be more or less hedged until the premium for being a "good" company dissipates (and it very likely would.) You don't really lose diversification in this scenario, since you'd be able to construct a long/short basket that can have you market neutral with respect to systemic inputs to the valuations of both companies.