Mathematical Finance & Financial Data Science Seminar

The Myth of Diversification, Reconsidered

Speaker: Will B. Kinlaw, Head of Research, State Street Global Markets

Location: Online Zoom access provided to registrants

Date: Tuesday, April 12, 2022, noon


Diversification is one of the core principles of investing. Unfortunately, it tends to disappear when it is needed most and turn up again when it is unwanted. To make matters worse, many investors and researchers measure these correlation asymmetries incorrectly. The fundamental flaw in most prior studies is that they focus only on instances where two assets lose money together, ignoring the more important case when one rises to truly offset (or diversify) the other. We propose that investors measure correlations conditional on the main engine of portfolio growth – often equities. By doing so, investors can focus on downside protection that is genuinely helpful when the growth engine falters. We show how to use a technique called full-scale optimization to construct portfolios that exploit correlation asymmetries to reduce risk.


Will is Senior Managing Director and Head of Research at State Street Global Markets. The team provides data-driven trade ideas and investment insights to thousands of investment managers, pension funds and sovereign wealth fund clients around the world. Its offerings leverage State Street’s proprietary information assets as well as data sourced through strategic partnerships with academics and alternative data partners.

Will and his co-authors were awarded the 2013 Peter L. Bernstein Award as well as the 2013, 2014, and 2015 and 2021 Bernstein Fabozzi/Jacobs Levy Outstanding Article Awards for their articles on liquidity, risk management, performance measurement, and diversification. His article on the role of sector exposures in describing the private equity premium won “Honorable Mention” for the 2016 Peter L. Bernstein Award. The second edition of his book, “Asset Allocation: From Theory to Practice and Beyond,” co-authored with Mark Kritzman and David Turkington, was published by Wiley in 2021.

Will serves on the editorial board of the Journal of Portfolio Management and the Journal of Alternative Investments. He holds an M.S. in Finance from the Carroll School of Management at Boston College and a B.A. in Economics from Tufts University, as well as a CFA designation. He joined State Street in 2002.


This event is free, but requires registration.  Please click here to register.  You will then receive the Zoom link by email about a day or so before the event.