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Data, Methods, and Models

Systemic Stock Risks vs. Asset Bundling diversified stock basket – 29% loss (Shanghai, S&P 500) diversified natural resources basket – 7% gain (Gold/Nat. Res) Asset Diversification Lessens Systemic & Idiosyncratic Risk!. Data, Methods, and Models.

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Data, Methods, and Models

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  1. Systemic Stock Risks vs. Asset Bundling diversified stock basket – 29% loss (Shanghai, S&P 500) diversified natural resources basket – 7% gain (Gold/Nat. Res)Asset Diversification Lessens Systemic & Idiosyncratic Risk!

  2. Data, Methods, and Models • Endogeneity and serial correlation (deep persistence of variables) • Explicitly account for international financial openness • AJRY 2008 approach (OLS to GMM-sys) • We use WIID data with Dollar-Kraay 2002 adjustments and the UNIDO wage data with Galbraith & Kum 2005 EHII adjustments.

  3. Correlations, GINI (s-1) & Polity (s), 1955-84 vs. 1990-2007(5 year panel averages, except 2005-07)

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