Investors' Diversification Strategies May Add Complexity to Financial Markets.
The article explores how different groups of investors make decisions in a financial market with multiple assets. They use a model with two risky assets and two types of investors: those who follow market trends and those who focus on fundamental analysis. The researchers find that the stability of the market depends on factors like how quickly trend followers adjust their expectations and the mix of investors in the market. They also discover that the correlation between assets can complicate things, as investors' beliefs about correlation and diversification don't always make the market more stable.