Chris Dillow 

How volatility emerges

Chris Dillow

Chris Dillow
How volatility emerges

Two of the biggest puzzles in equity investing are that volatility varies considerably and unpredictably; and that there seems to be no trade-off between it and returns on the aggregate market: Alan Moreira and Tyler Muir, and Andrew Lo, have shown that it actually pays to buy equities when volatility is low not high, which is the opposite of what you’d expect if there were a trade-off between risk and return. These two puzzles might be related.

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