[R-SIG-Finance] Diversification Comments...

[bogdan romocea]

> When correlations converge on one and that lower barrier is touched
> long-term goals mean nothing as investing stops and liquidation
> starts. Many examples of this in the last two weeks news.

A nice article on the same theme:
http://www.economist.com/daily/columns/marketview/PrinterFriendly.cfm?story_id=9749127



> -----Original Message-----
> From: r-sig-finance-bounces at stat.math.ethz.ch
> [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of BBands
> Sent: Thursday, August 23, 2007 4:11 PM
> To: R-sig-finance
> Subject: Re: [R-SIG-Finance] Diversification Comments...
>
> Terminal wealth means nothing in the presence of large drawdowns.
>
> See Ralph Vince's new book for some consideration of the above idea.
>
> http://www.amazon.com/Handbook-Portfolio-Mathematics-Formulas-
> Allocation/dp/0471757683/
>
> "Risk is the probability of being ruined."
>
> "Ruin is touching or penetrating some lower barrier on your equity."
>
> When correlations converge on one and that lower barrier is touched
> long-term goals mean nothing as investing stops and liquidation
> starts. Many examples of this in the last two weeks news.
>
> Also of interest, the 23 August ISI Quantitative Research piece
> entitled "Market Direction and Sector Correlation".
>
>     jab
> --
> John Bollinger, CFA, CMT
> www.BollingerBands.com
>
> If you advance far enough, you arrive at the beginning.
>
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