An Infinite Regress. Of Dumb: More Reflections on “Market Efficiency”

Re:An Infinite Regress. Of Dumb: More Reflections on “Market... by rhino369 on Monday March 16, 2015 @05:29PM (#9214523)

Some knew, but most didn't appreciate the risk correctly. Of course they knew about the idea of black swan events, but 2008 was not a black swan event. It was caused by a rather mild dip in real estate prices and a rather mild amount of mortgage defaults.

The problem was that models assumed some risks were uncorrelated and in 2008 they became highly correlated.

A lot of major wall street institutions got destroyed by it.

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Re:An Infinite Regress. Of Dumb: More Reflections on “Market... by lordnacho on Tuesday March 17, 2015 @02:30PM (#9220164)

>The problem was that models assumed some risks were uncorrelated and in 2008 they became highly correlated.

2008 was not the first time correlation shot to 1. Sure, it's hard to model, I'll admit that. But to think that nobody had considered this is wrong.

I saw a bunch of people who knew the models were wrong, but nobody had the balls to say so while the spreadsheets still worked.

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