How Ethnic Diversity Deflates Price Bubbles
Channel: DrSheenLevine
Date: 2014-11-17

Stock Bubbles are Deflated by Ethnic Diversity
In diverse company, people think more deeply, make better decisions, study finds

From The Great Depression through the dot-com boom of the 1990s to the recent financial crisis, stock market bubbles are a constant malaise. Even as bubbles devastate individuals and nations, preventing them has been difficult because their sources remain opaque.

A new study proposes a cause: Bubbles happen when people mindlessly trust the behavior of others, and they do so much more often when surrounded by ethnic peers. In an article published today in Proceedings of the National Academy of Sciences, researchers show that markets of ethnically diverse traders are much less likely to suffer bubbles. These findings could have a lasting impact on economics — and ethnic diversity.

http://j.mp/1qPDViK