Does Ethnic Diversity Deflate Asset Bubbles?

When animal spirits cause asset prices to pull away from reality, or to come crashing back down, it’s hard to pretend that the market is a rational machine churning out fair valuations. But knowing the dangers of groupthink and successively avoiding them are two different matters. Taking diverse perspectives into account can help and, according to a new research paper, ethnic diversity in particular leads to more accurate asset pricing.

“In homogenous markets, overpricing is higher as traders are more likely . . .

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