Читать книгу Behavioral Portfolio Management - C. Thomas Howard - Страница 25

There is no more confusing issue regarding the role of investor emotions than how to measure investment risk. Those measures currently used to capture investment risk, once carefully examined, are mostly measures of emotion. As an example take volatility, as measured by return standard deviation. Earlier I reviewed the evidence regarding stock market volatility which concludes that most volatility is generated by Crowds overreacting to information flowing into the market. Indeed, almost none of the current volatility can be explained by changes in underlying economic fundamentals at both the market and individual stock level. So volatility is mostly a measure of emotions and not necessarily investment risk. This is also true of other measures, such as downside standard deviation, maximum drawdown and downside capture.

Investment risk is the chance of underperformance. Measuring underperformance depends on the time horizon of the investment and the specific goal of the investor. For example, if the goal is to have a fixed amount at a fixed time in the future (e.g. $100,000 in two years), risk is measured as the chance of ending up with less than $100,000 in two years. In this case, short-term volatility is an important contributor to risk.

In cases where there is a specific long-term need (e.g. $1,000,000 in 30 years), risk is measured as the chance of not meeting this goal. In the cases where there is no specific time horizon, however, the appropriate benchmark is the highest expected return investment being considered, since over long time periods the actual return should approximate the expected return due to the law of large numbers. Most long-term investment situations fall into the latter.

Another important consideration is that short-term volatility plays an ever smaller role as the time horizon lengthens. This is because the short-term emotionally and economically-driven price changes tend to offset one another over the long run, to the tune of reducing long-term volatility by a factor of three to four relative to short-term volatility.