RT Journal Article
SR Electronic
T1 Rethinking Risk (II): <em>The Size and Value Effects</em>
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 78
OP 83
DO 10.3905/jwm.2014.17.3.078
VO 17
IS 3
A1 Javier Estrada
YR 2014
UL https://pm-research.com/content/17/3/78.abstract
AB Small-cap stocks are typically viewed as riskier than large-cap stocks, and value stocks as riskier than growth stocks. But are they? It depends, both on an investor’s holding period and the way he assesses risk. If an investor is concerned with volatility, either during or at the end of the holding period, then the conventional wisdom is correct. However, if an investor focuses on his long-term terminal wealth, then the conventional wisdom is turned on its head: The evidence discussed in this article strongly suggests that small stocks should be viewed as less risky than large stocks, and value stocks as less risky than growth stocks. This is the case because small and value stocks offer both more upside potential and, when tail risks strike, better downside protection than do large and growth stocks.TOPICS: Security analysis and valuation, analysis of individual factors/risk premia, risk management, performance measurement