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Integrated Portfolio Solutions
Alternative Investment
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HOW INDEX FUNDS ARE HURT BY VOLATILITY AND REBALANCING September 2000 Index rebalancing and the new dynamics of market volatility have rendered specialized index funds less attractive than other risk-controlled strategies. To understand why, we must first look at how volatility is affecting the stock market. When measured over months or quarters rather than days, stock markets in recent years have been no more volatile than previously, but the volatility of individual stocks has risen sharply. This increased volatility has been offset by a decreased correlation between individual stocks, leaving overall market volatility unchanged. |
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