TY - JOUR T1 - Chicken Little Gets It Wrong Again JF - The Journal of Portfolio Management SP - 77 LP - 86 DO - 10.3905/jpm.2014.40.3.077 VL - 40 IS - 3 AU - Anna Agapova AU - Robert Ferguson AU - Dean Leistikow Y1 - 2014/04/30 UR - https://pm-research.com/content/40/3/77.abstract N2 - Many investors see little opportunity for active portfolio managers to exploit relative returns in environments with high return correlation. Contrary to what current-day Chicken Littles believe, the authors empirically find a positive relation between the S&P 500’s average constituent stock relative-return volatility and its average between-constituent return correlation. Moreover, the S&P 500’s index-return variance, average between-constituent return correlation, average constituent relative-return variance, and average constituent residual-return variance are all positively related to a statistically significant degree. The authors also provide a theoretical foundation for these empirical findings.TOPICS: Manager selection, portfolio theory, statistical methods ER -