The common fall of asset prices during crises and recessions implies that asset correlation is strong during these events, while not necessarily showing up during the boom phase of the business cycle. Using insights from the malinvestment cycle theory, we show that this shift in correlation is...

After the recent financial crisis, it came to light that the correlation parameters in the evaluation models used by credit rating agencies to assess the default risk of structured financial products were largely inaccurate. This nonperformance was partly based on a lack of historical data to...