Backward-looking measures do not always predict future asset risk - Orbis

UK house prices and property in 2007 as an example

Victoria McKeever
clock • 2 min read

Backward-looking interpretations of risk are not the best way to predict the future behaviour of asset classes, as seen in the previous market crash, Orbis Investment analyst Ashley Lynn has said.

"When you talk to a lot of financial analysts and economists, they discuss risk in terms of betas, Sharpe ratios and volatility - a lot of mathematical numbers that are historically backward-looking," said Lynn (pictured).  She added, however, that was not to say these measures were not important. At the same time, she said: "Remember that most of these ratios came out of the works of Sharpe and Markowitz - they believed in efficient markets." In this instance, if all assets were correctly priced, the only risk would be them randomly moving up or down. Nine in ten risk-targeted ...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Investment

Future of Investment Festival: Our specialist sessions for advisers

Future of Investment Festival: Our specialist sessions for advisers

Targeted at sustainable, forward-thinking finance professionals

Professional Adviser
clock 10 May 2024 • 1 min read
Defaqto: 'No appropriate and compliant way to compare MPS portfolios'

Defaqto: 'No appropriate and compliant way to compare MPS portfolios'

Tech firm to debut a performance comparator tracking solutions’ data

Hope Coumbe
clock 09 May 2024 • 1 min read
Assessing investment decisions made in the heat of the moment

Assessing investment decisions made in the heat of the moment

'Investors were panicking, thinking no one would ever go outside again'

Chris Justham
clock 08 May 2024 • 2 min read