bpdulog

ih8studying Wrote:
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> That's what I'm getting confused about. On one
> hand, it states that during periods of crises, the
> correlations increase which is ironic when you use
> emerging markets as diversifiers.
>
> Then they state a rebuttal stating that, in fact
> that correlations do NOT increase, rather it's
> just a case of increased volatilities?
>
> Or am I way off base?

That's exactly the way I read it. Correlations increase but it is an error in the way correlations are measured as volatility the denominator increases so covariances/correlations do not actually increase.

Literally the next pages contradicts the page before it.