@article {Agapova77, author = {Anna Agapova and Robert Ferguson and Dean Leistikow}, title = {Chicken Little Gets It Wrong Again}, volume = {40}, number = {3}, pages = {77--86}, year = {2014}, doi = {10.3905/jpm.2014.40.3.077}, publisher = {Institutional Investor Journals Umbrella}, abstract = {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{\textquoteright}s average constituent stock relative-return volatility and its average between-constituent return correlation. Moreover, the S\&P 500{\textquoteright}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}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/40/3/77}, eprint = {https://jpm.pm-research.com/content/40/3/77.full.pdf}, journal = {The Journal of Portfolio Management} }