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Gambling, trading and correlations

Chris Dillow

Chris Dillow
Gambling, trading and correlations

One of the many vexations equity investors have is that shares even in apparently very different companies often move up and down together, with the result that it's hard to spread risk by diversifying across them. But why are they so correlated? In part, it's because equity traders are gamblers, so shares move together as their taste for a bet rises and falls.

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