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Correlations change over time. Assets tend to be more strongly positively correlated when the market crashes, and less positively correlated when the market booms. In
Correlations change over time. Assets tend to be more strongly positively correlated when the market crashes, and less positively correlated when the market booms. In your opinion, how do these time-varying correlations would affect the performance of the market portfolio? Would the market portfolio post higher or lower Sharpe ratios when the market booms vs when it crashes if correlations are time-varying?
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