More returns, more risk? Fiddlesticks
Article by Dr. Jasperneite
At university we learned that risk in the financial markets is measured by the volatility of prices. The higher the volatility, the greater the price fluctuations. However, volatility says nothing about the direction of prices. At this point, however, the question arises as to whether the risk of an investment is even adequately described by volatility. An investor largely does not care about a volatility of 15 percent if it statistically results from temporary dips that are quickly made up again. A volatility of five percent, on the other hand, can feel terrible if it results from a steadily downward price trend that does not involve major fluctuations.
You can find out which alternative risk measure we prefer and whether a higher return necessarily goes hand in hand with a higher risk in the current issue. The results surprised even us: