EM correlation

Isnt the observation that “Emerging market returns’ correlation with the developed markets goes up during time of increased volatility” a function of statistical properties? I remember reading it in at least 2 seperate SSs. Explanation to Q# 40155 in S. pro apparently doesnt think so. Any updates?

I believe that this is TRUE for this test. I think we should ignore the statistical anomolies on this one.

bigwilly Wrote: ------------------------------------------------------- > I believe that this is TRUE for this test. I > think we should ignore the statistical anomolies > on this one. Are you saying I am rite and the S.pro version is a typo?

dont know what Schweser says, dont have Schweser

if it says true ( or long run for that matter) correlation goes up - then it is false if it says correlation goes up - then it is true

CSK??? What the heck are you trying to say on the first one ?? :slight_smile:

OK, so what is the answer…if we see that on the exam, do we say it is true that corrleation “go up” during time of crisis, or we mark it false??

i will say true, you will say false that way it will be net 0 on the curve…

I will say True also, so now we are +66%

Cool…thanks

comp_sci_kid Wrote: ------------------------------------------------------- > i will say true, you will say false that way it > will be net 0 on the curve… Thanks that really helped … now can some1 tell me if its just a statistical anomaly or are I banks covering it up to make people bullish on EMs?

cfa dude Wrote: ------------------------------------------------------- > comp_sci_kid Wrote: > -------------------------------------------------- > ----- > > i will say true, you will say false that way it > > will be net 0 on the curve… > > Thanks that really helped … now can some1 tell > me if its just a statistical anomaly or are I > banks covering it up to make people bullish on > EMs? CFAI claims it is statistical anomaly and that ‘true’ correlation doesnt go up. Whatever that means

There has been a lot of empirical research done on this topic. Nothing has been 100% conclusive, but majority of researchers think that “true” correlation doesn’t go up…

this is where the essay type ques are better … you can argue both ways and they will give you marks