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Stock Market Returns and Volatility

Is volatility a friend or foe?

Nicolas Rabener
10 min read
6 Dec 2021

SUMMARY

  • Average stock market returns are similar regardless if volatility was high or low
  • However, given skewed returns, it was not attractive investing when volatility was high
  • Unfortunately implementing a strategy to avoid high volatility periods is emotionally challenging

INTRODUCTION

Active fund managers frequently complain about stock market volatility being too low for their taste and articulate a preference for more volatile markets. When stock markets crash, they can keep calm and carry on with their jobs. Retail investors in panic mode should provide plenty of opportunities to generate alpha. 

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