%0 Journal Article %A Anna Agapova %A Robert Ferguson %A Dean Leistikow %T Chicken Little Gets It Wrong Again %D 2014 %R 10.3905/jpm.2014.40.3.077 %J The Journal of Portfolio Management %P 77-86 %V 40 %N 3 %X 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 %U https://jpm.pm-research.com/content/iijpormgmt/40/3/77.full.pdf