The volatility of low volatility
Ingham Analytics issues an Equity Insight entitled “The volatility of low volatility”. On 24 March (see “Fixed income leads the way for equities”) we observed that the intensity and speed with which the equities meltdown has unfolded has shocked even the most bearish of traders and investors in financial markets. What is striking too to is that low volatility, low beta, higher Sharpe ratio (risk adjusted return) stocks have performed poorly, contrary to what portfolio theory suggests. In fact, in the US, cumulative redeemable preference shares, which should be rock solid, have been behaving like vanilla equity in several instances. REITs have too. Is there an explanation, and will it last? This note is another valuable analysis by Ingham Analytics to help traders and investors navigate this unprecedented turbulence.
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