Risk Without Return

Journal of Investment Strategies, Volume 2, No. 2, Spring 2013

9 Pages Posted: 24 Aug 2013 Last revised: 3 Sep 2013

See all articles by Lisa R. Goldberg

Lisa R. Goldberg

University of California, Berkeley; Aperio Group

Ola Mahmoud

University of Basel; University of California, Berkeley

Date Written: September 2, 2013


Risk-only investment strategies have been growing in popularity as traditional investment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that apparently distinct risk-based investment strategies are manifestations of a single effect. Second, turnover and associated transaction costs can be a substantial drag on return. Third, capital diversification benefits may be reduced. Fourth, there is an apparent connection between performance and risk diversification. To analyze risk diversification benefits in a consistent way, we introduce the Risk Diversification index (RDI) which measures risk concentrations and complements the Herfindahl-Hirschman index (HHI) for capital concentrations.

Suggested Citation

Goldberg, Lisa R. and Mahmoud, Ola, Risk Without Return (September 2, 2013). Journal of Investment Strategies, Volume 2, No. 2, Spring 2013. Available at SSRN: https://ssrn.com/abstract=2314988 or http://dx.doi.org/10.2139/ssrn.2314988

Lisa R. Goldberg

University of California, Berkeley ( email )

Department of Statistics
367 Evans Hall
Berkeley, CA 94720-3860
United States

Aperio Group ( email )

3 Harbor Drive
Suite 315
Sausalito, CA 94965
United States

Ola Mahmoud (Contact Author)

University of Basel ( email )

Petersplatz 1
Basel, CH-4003

University of California, Berkeley ( email )

Center for Risk Management Research
Evans Hall
Berkeley, CA 94720
United States

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