Downward-sloping security market line: a sign the end is nigh?
| Apr 29th, 2007 | Filed under: CAPM / Alpha Theory | By: Alpha Male |
|
Here is yet more evidence that high volatility stocks do not necessarily out perform low volatility stocks. A new research paper by the brainiacs at Dutch institutional investment manager Robeco shows that not only don’t high-vol stocks outperform low-vol stocks, but they actually underperform them. You heard right. The security market line (SML) slopes down, not up as the researchers illustrate in the chart below.
If this isn’t a sign that the end is nigh, we don’t know what is. As Dan Akroyd and Bill Murray warned us all in the movie Ghostbusters, the End involves: “Fire and brimstone coming down from the sky…Rivers and seas boiling…Forty years of darkness…Dogs and cats living together…and a downward sloping SML“.
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
[...] All About Alpha looks at an intriguing connection between the “liquidity effect” and the rise of private equity. [...]
[...] Downward-sloping security market line: a sign the end is nigh? [...]