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105 sats \ 0 replies \ @SimpleStacker 12 Feb \ on: It No Longer Takes a Crisis for All Correlations to Go To One (The Economist) econ
I remember talking about this with my professors in grad school. We had this idea that the proliferation of mortgage backed securities created correlations in geographic housing markets that weren't there before.
Essentially, demand for MBS and easy credit drove house price growth across all markets at once, rendering the risk assessments of MBS that were based on historical data totally meaningless.
Same is probably happening with the dominance of basket ETFs