PT - JOURNAL ARTICLE AU - Anna Agapova AU - Robert Ferguson AU - Dean Leistikow TI - Chicken Little Gets It Wrong Again AID - 10.3905/jpm.2014.40.3.077 DP - 2014 Apr 30 TA - The Journal of Portfolio Management PG - 77--86 VI - 40 IP - 3 4099 - https://pm-research.com/content/40/3/77.short 4100 - https://pm-research.com/content/40/3/77.full AB - 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