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Science 24 April 2009:
Vol. 324. no. 5926, pp. 452 - 453
DOI: 10.1126/science.324_452b
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News of the Week

German Physical Society:

Leverage: The Root of All Financial Turmoil

Adrian Cho

According to a new analysis reported at the German Physical Society meeting, leverage--the practice by hedge funds and other investors of borrowing money to buy investments--is the root of many nettlesome properties of financial markets that classical economics cannot explain, including a propensity to crash. The model shows that many of the distinctive statistical properties of financial markets emerge together as rates of leverage climb.

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Science. ISSN 0036-8075 (print), 1095-9203 (online)