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why is the volatility a factor ? My intuition say that you with high volatility is a lot easier to pick the wrong equities. Is that correct ?
by fbru02 14y ago
why is the volatility a factor ? My intuition say that you with high volatility is a lot easier to pick the wrong equities. Is that correct ?
- tedunangst 14y agoThere are two ways to compare returns. Higher returns at the same risk or the same returns at lower risk. Either is better.
- jnewell 14y agovolatility is the de facto measure of risk for a portfolio/trading strategy (there are more measures but vol is common). People tend to measure performance on a risk-adjusted basis (for example the Sharpe or Information Ratio) because in an ideal world an investor could theoretically lever/delever a portfolio to a level of risk they are comfortable with. All things being equal a higher Sharpe ratio would give you more returns for the same amount of risk as a portfolio with a lower Sharpe ratio.