Risk Without Return
Journal
Journal of Investment Strategies
ISSN
1460-1559
Type
journal article
Date Issued
2013-01-31
Author(s)
Abstract (De)
Risk-only investment strategies have been growing in popularity as traditional
investment strategies have fallen short of return targets over the last decade.
However, risk-based investors should be aware of four things. First, theoretical
considerations and empirical studies show that apparently distinct risk-based
investment strategies are manifestations of a single effect. Second, turnover and
associated transaction costs can be a substantial drag on return. Third, capital
diversification benefits may be reduced. Fourth, there is an apparent connection
between performance and risk diversification. To analyze risk diversification
benefits consistently, we introduce the risk diversification index, which measures
risk concentrations and complements the Herfindahl–Hirschman index for capital
concentrations.
investment strategies have fallen short of return targets over the last decade.
However, risk-based investors should be aware of four things. First, theoretical
considerations and empirical studies show that apparently distinct risk-based
investment strategies are manifestations of a single effect. Second, turnover and
associated transaction costs can be a substantial drag on return. Third, capital
diversification benefits may be reduced. Fourth, there is an apparent connection
between performance and risk diversification. To analyze risk diversification
benefits consistently, we introduce the risk diversification index, which measures
risk concentrations and complements the Herfindahl–Hirschman index for capital
concentrations.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Refereed
Yes
Publisher
Incisive Media
Volume
2
Number
2
Start page
111
End page
120
Division(s)
Eprints ID
251778
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