Correlations Among Stocks Forming The Dow Jones Industrial Average
A quantitative analysis of 72 years of financial data from the Dow Jones Industrial Average reveals that in times of financial crises, stocks start to move in a more synchronised fashion, increasing the risk of a stock portfolio. The research is published in the journal Scientific Reports. Financial traders try to reduce the inherent risk of holding only one stock by building portfolios, which carry a lower risk, mainly because individual stocks do not tend to experience daily gains and losses in a completely synchronised manner. Tobias Preis and colleagues analyzed daily closing prices of the 30 stocks that form the Dow Jones Industrial Average, from March 1939 to the end of 2010. They find that the average correlation between these stocks increases at the same rate as market stress. Consequently the diversification effect, which should protect a portfolio, melts away in times of market losses, just when it would be needed most.
Read more about this topic: Dow Jones Industrial Average
Famous quotes containing the words stocks, forming, dow, jones, industrial and/or average:
“We Americans have the chance to become someday a nation in which all radical stocks and classes can exist in their own selfhoods, but meet on a basis of respect and equality and live together, socially, economically, and politically. We can become a dynamic equilibrium, a harmony of many different elements, in which the whole will be greater than all its parts and greater than any society the world has seen before. It can still happen.”
—Shirley Chisholm (b. 1924)
“Young people of high school age can actually feel themselves changing. Progress is almost tangible. Its exciting. It stimulates more progress. Nevertheless, growth is not constant and smooth. Erik Erikson quotes an aphorism to describe the formless forming of it. I aint what I ought to be. I aint what Im going to be, but Im not what I was.”
—Stella Chess (20th century)
“The woman was old and ragged and gray
And bent with the chill of the Winters day.”
—Mary Dow Brine (18161913)
“Come all you rounders if you want to hear
A story bout a brave engineer;
Casey Jones, that was the rounders name
On a heavy eight-wheeler he rode to fame.”
—Unknown. Casey Jones (l. 14)
“Nearly all the Escapists in the long past have managed their own budget and their social relations so unsuccessfully that I wouldnt want them for my landlords, or my bankers, or my neighbors. They were valuable, like powerful stimulants, only when they were left out of the social and industrial routine.”
—Willa Cather (18761947)
“... the average Catholic perceives no connection between religion and morality, unless it is a question of someone elses morality.”
—Mary McCarthy (19121989)