Over the long-run, risk and return within equity markets are not related. Selecting stocks with a higher risk, does not automatically lead to a higher return. This empirical finding contradicts investment theory, which states that higher risk should give a higher expected return.
The figure below shows the average compounded return of portfolios sorted on historical volatility and beta for the 80-year period from 1931-2009.1 It shows that high-risk stocks are especially unattractive, based both on the return, which is lower, and on risk, which is higher. On the other hand, low-volatility portfolios are especially attractive because they increase the return per unit of risk. The return/risk ratio over the period is 0.68 for the lowest volatility portfolio and steadily decreases to 0.15 for the highest-volatility portfolio.
Based on these empirical results one should avoid the most volatile stocks. For investors with an absolute return focus, for example, investors aiming to maximize the Sharpe ratio, the stocks with the lowest volatility should be selected. Still, it is interesting to investigate how stable these results are over time. Eighty years is a very long time period and much longer than the investment horizon of most investors. If we zoom-in on the eight different decades comprising the period from 1931-2009, has the relation between risk and return always been negative?
The information contained on these pages is for marketing purposes and solely intended for Qualified Investors in accordance with the Swiss Collective Investment Schemes Act of 23 June 2006 (“CISA”) domiciled in Switzerland, Professional Clients in accordance with Annex II of the Markets in Financial Instruments Directive II (“MiFID II”) domiciled in the European Union und European Economic Area with a license to distribute / promote financial instruments in such capacity or herewith requesting respective information on products and services in their capacity as Professional Clients.
The Funds are domiciled in Luxembourg and The Netherlands. ACOLIN Fund Services AG, postal address: Affolternstrasse 56, 8050 Zürich, acts as the Swiss representative of the Fund(s). UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zurich, postal address: Europastrasse 2, P.O. Box, CH-8152 Opfikon, acts as the Swiss paying agent. The prospectus, the Key Investor Information Documents (KIIDs), the articles of association, the annual and semi-annual reports of the Fund(s) may be obtained, on simple request and free of charge, at the office of the Swiss representative ACOLIN Fund Services AG. The prospectuses are also available via the website www.robeco.ch. Some funds about which information is shown on these pages may fall outside the scope of the Swiss Collective Investment Schemes Act of 26 June 2006 (“CISA”) and therefore do not (need to) have a license from or registration with the Swiss Financial Market Supervisory Authority (FINMA).
Some funds about which information is shown on this website may not be available in your domicile country. Please check the registration status in your respective domicile country. To view the RobecoSwitzerland Ltd. products that are registered/available in your country, please go to the respective Fund Selector, which can be found on this website and select your country of domicile.
Neither information nor any opinion expressed on this website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco Switzerland Ltd. product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports.