Risk Management and the Role of Volatility

By Kathryn M. Kaminski, PhD, CAIA®

Highlights

  • Risk is something we can measure and manage, whereas uncertainty is not easily managed.
  • Although many investors and portfolio managers are aware of risk, their portfolios are often not risk-aware, i.e., they do not use volatility to size portfolio allocations actively.
  • Regardless of returns, the combination of a risk-managed and a traditional (not risk-aware) long-equity exposure can create a more balanced risk profile over time.

Resources


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