West Loop Financial LLCWhen Risk Doesn’t Lead To Return – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 When Risk Doesn’t Lead To Return https://www.westloopfinancial.com/2016/02/29/when-risk-doesnt-lead-to-return/ https://www.westloopfinancial.com/2016/02/29/when-risk-doesnt-lead-to-return/#respond Mon, 29 Feb 2016 09:00:49 +0000 http://evolvemypractice.com/?p=2632 Among the more notable anomalies in modern finance is the finding that the lowest-beta stocks have produced higher returns than the highest-beta stocks. Another anomaly is that idiosyncratic (diversifiable) volatility negatively predicts equity returns. In other words, stocks with the lowest idiosyncratic volatility outperform stocks with the highest idiosyncratic volatility. These findings have spurred a...

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]]> Among the more notable anomalies in modern finance is the finding that the lowest-beta stocks have produced higher returns than the highest-beta stocks. Another anomaly is that idiosyncratic (diversifiable) volatility negatively predicts equity returns. In other words, stocks with the lowest idiosyncratic volatility outperform stocks with the highest idiosyncratic volatility.

These findings have spurred a large body of literature on what are referred to as “low-risk anomalies.” Such results are considered puzzling because higher risk should be rewarded with higher returns, but here we see just the opposite.

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