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Will the diversification work?
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In both years, investors were left wondering whether diversification worked.
It's during the more normal periods that diversification works its magic, he said.
"It helps people get back to, as boring as it is, the fact that diversification works.
A 2011 paper by Xavier Gabaix of New York University explains how diversification works when firms are independent and their sizes follow a regular "bell-shaped" distribution.
Our fieldwork and comparison of two disaster recoveries at Aisin Seiki and Riken Corporation shows that while temporary sourcing diversification worked in the Aisin Seiki case, it was impossible at Riken due to the high degree of specificity required in the design and manufacturing methods of the disrupted product item, suggesting product and process specificity limits recovery alternatives.
Implication No. 1: Diversification works.
The graph shows you the gist of why this diversification works.
Ken, just so I understand, why do you say diversification worked poorly?
These are three questions which indicate the degree of financial literacy in three main areas -- how interest works, how inflation works, and how investment diversification works.
Those supposedly well-diversified investors didn't realize, however, that diversification works only if everyone isn't doing the same thing with immense leverage.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com