As a result, regulations increase the cost of capital and reduce the fair value investors are willing to pay for these stocks. Specifically, these regulations make raising sufficient capital to weather adverse economic conditions more difficult at a small size. regulations have diminished the returns and increased the risks associated with smaller companies. Accordingly, you may be wondering, why not look to small-cap stocks? As it turns out, small-cap stocks usually hold less risk, but U.S. Companies decrease investments, consumers reduce spending, overall uncertainty rises, and mean-variance preferences emphasize toward lower variance. As small-cap stocks continue to lag, it now seems more likely that the safe haven for investing during these uncertain times happens to be mid-caps.ĭuring crises, investors’ risk aversions are at an all-time high. For Matthew Bartolini and a few others, the Goldilocks Principle looks to mid-cap stocks to avoid extremes and to generate “just the right amount” of return and variance. In statistics, the principle refers to linear regression models with just the right amount of bias and variance to reduce error. For example, in developmental psychology, the principle refers to an infant’s proclivity to try out activities that are not too simple, not too complex, but just the right level of difficulty. This premise upholds the Goldilocks Principle, the concept of achieving “just the right amount” by avoiding extremes, that applies across a vast range of fields. He noticed that mid-caps have historically been top performers during crises or pandemics. In his most recent research report, Head of SPDR Americas Research Matthew Bartolini came out with a hypothesis that mid-cap stocks happen to be the sweet spot along the market capitalization spectrum. However, analysts are increasingly finding that stocks in between that wide net seem to be the best option during financial crises. The many options for market capitalization among companies range from nano-caps at less than $50 million to mega-caps in excess of $200 billion. Researchers are noticing that a good way to find this sweet spot and optimize mean-variance – maximizing returns for a given level of risk – is to filter by market capitalization. Traders this pandemic season are trying to mimic that same strategy with not too much volatility, not too little return, but just the right portfolio fit. The thermostat actually is in Indian hands.“Not too big, not too small, but just right,” said Goldilocks, as she rummaged through the different bowls of porridge. The right temperature in this context is a variable and it correlates strongly with the index of unity. Incidentally, the Goldilocks analogy is not about how much the pot is stirred but getting the temperature right. India can considerably raise the index of unity with the West, by disambiguating its secular and legal market economy credentials. The deep state is not that warm towards India, in fact, bit suspicious and the reason for this would be pretty clear to discerning folks. The long-term outlook is not very encouraging at present. After Congress split India took a sharp leftward turn, forming the government with left support, what really mattered was it was critical of the US on Vietnam. There the PSUs were all greenfield projects, not an outcome of any nationalization, barring perhaps Air India wherein the operative model was probably BOAC. Nehru had kept India on twin-track of development, enabling the private sector where it could, and PSUs stepping in when it could not. It is worth examining how the West perceived India in 19. The key phrase in his assertion which gives room for re-calibration at the present juncture is “tried to stir the Indian porridge just right.”. But in less than a decade in 1971, when it seems to the West that India is seeking primacy in the subcontinent, the West opposes India.”. To drive home the point, he said “So, actually, we have a very interesting situation when India in 1962 after the conflict where we were defeated, the West actually comes to the assistance of India. But when it came to industrialization, particularly in heavy industries or in defence and security, the West was very conservative.”ĭr Jaishankar’s assessment is an accurate one. pretty much across the development spectrum, the West was very supportive. And sometimes, there were margins of error on either side. So it stirred the Indian porridge or tried to stir the Indian porridge just right. In his speech at Atlantic Council, he said: “It is what I would call a sort of a goldilocks era of our relationship, which is: the West didn’t want India to get too weak, it didn’t want India to get too strong. Foreign minister Jaishankar referred to West using Goldilocks principle on India.
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