19 February 2010
Buying Risk - so what's risk?
We created two model portfolios of Risky and Safe Stocks. Risky= Low Ford VMO (i.e.low quality of earnings and price momentum) AND High Beta. Safe=High VMO AND Low Beta. Using those rules together produces much more trendy (autocorrelated) portfolios. If the Risk>Safety the markets usually trend higher on short and long-terms. And because it's a long-short hedge, most of the market's noise is eliminated.