alleryStart learning →What went wrong with diversification in the late-2000s recession?
ACorrelations rose, assets moved together
BCorrelations fell to zero everywhere
CInterest rates were fixed by law
DMarkets stayed closed for a year
Answer & Solution
Correct answer: A. Correlations rose, assets moved together
Assets that had small or negative correlations began moving in the same direction, so diversification failed to protect holders.
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