The Joy of Volatility
FINRISK Working Paper No. 374
6 Pages Posted: 28 Apr 2007
Modern portfolio theory regards the return of an asset as its upside, while volatility is seen as its downside. This view is shared by the majority of investors who dislike volatile markets. Recent results in financial mathematics, however, show that volatility is actually good, rather than bad, for financial growth. Very simple active portfolio management opens up this profitable opportunity to generate growth from volatility.
Keywords: Volatility, capital growth, investment, constant proportions strategies
JEL Classification: G00
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