UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next
Author: TMFCogitarius Big gold star, 5000 posts Old School Fool Home Fool Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 46826  
Subject: Higher risk, but not higher returns Date: 4/16/2012 12:29 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Ex-TMFer Shannon Zimmerman, writing for Morningstar, rebuts the conventional wisdom that higher returns are driven by higher risk:

'On average, high-beta investments--those whose prices have swung wider than an index over a given period of time--have historically generated worse returns than less-volatile alternatives.

The pattern has been persistent. A study that appeared last year in the CFA Institute's Financial Analysts Journal found that between 1968 and 2008, a portfolio comprising the least-volatile quintile of the market's 1000 largest stocks swamped the most-volatile quintile over the course of 40 years. And in a 2011 paper by Lasse Pedersen and Andrea Frazzini, the duo find better risk-adjusted returns resulting from "betting against beta" across a broad range of asset types and geographic boundaries over a 50-year time frame.'
http://www.morningstar.co.uk/uk/news/article.aspx?articleid=...

Of course, volatility is merely one component of risk, but it sure is good to know relatively 'boring' stocks aren't laggards when it comes to long term competitive returns. Hare and tortoise redux?
-------------------
Global Gains Home Fool
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Value Hounds

Kate Spade's Wild Ride
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement