Johnson: Non-diverse shareholder bases make stocks prone to violent moves
Paul Johnson · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · Nov 27, 2017 · at 16:52
Paul Johnson, author and Columbia Business School professor, explains how a lack of cognitive diversity among a company's shareholders amplifies downside volatility.
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“Just because you lack diversity or independence doesn't mean they're wrong. And there's a subtlety there that's not insignificant. We're not saying that Amazon is mispriced. We're just saying the crowd's not very diverse. So if an event happens that challenges the crowd's view, this stock's going to move hard and violently.”
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