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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 72.10+1.4%3:59 PM EST

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To: Gary Burton who wrote (43378)11/12/2000 10:48:11 PM
From: John Malloy  Read Replies (3) of 77397
 
Gary,

<Why is it any less likely than when it traded 5.5 above due to the bubble mania? Can't we overshoot in both directions? >

Certainly we can overshoot in both directions. A drop of 2 standard deviations below the correlation would be within the normal range of variation. Larger drops are certainly possible, but the larger the drop the less likely it is. A drop of 5.5 standard deviations is a giant drop statistically. My personal opinion is that a return to the correlation is more likely than a 5.5-standard deviation drop.

John Malloy
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