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Liam's avatar

Hi Joachim, I wonder if weighting contributes to the situation? A stock which is over valued will have a higher market capitalisation, and will have a higher number of samples contributing to the index. Meanwhile, companies trading below fair value will be under- counted (less of their stock will be included). The collapse of a bubble sees the index suddenly re-weighted from the frothy sector toward the broader economy.

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André Jacobi's avatar

Ingeniuos article. Thanks for the input. Can‘t wait until I read part II.

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