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I find this interesting because return variance (risk) and mean are supposed to correlate positively in the ‘efficient frontier’ theory that value investing is
by jl2718 6y ago
I find this interesting because return variance (risk) and mean are supposed to correlate positively in the ‘efficient frontier’ theory that value investing is based on.
- reducesuffering 6y agoThat’s another of the possible explanations. That value companies are usually more debt-ridden and in declining industries and are thus higher risk. Although one way to measure risk is std. deviation (volatility), and while smaller cap stocks are considered “riskier” and they have higher std. deviation, value stocks don’t have meaningfully higher std. deviation.