Saturday, July 24, 2010

Sakoui et al: Correlation

...“In a macroeconomic crisis investors don’t lose time stock-picking. Either the whole economy is going to ground and you sell everything or the market is cheap, then you buy everything. Stock-picking comes later in the cycle,” says Stephane Mattatia, head of financial engineering and advisory at Société Générale.

“Volatile and bear periods are characterised by high correlation,” he says.

The rapid growth of exchange-traded funds may be a factor as well. As trading in ETF shares has grown in popularity, some analysts believe that it has led to increased activity in buying and selling groups of stocks and other assets.

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