Fisher Investments' Founder Ken Fisher Debunks: Beta Measures Risk

Описание: Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher discusses the shortcomings of Beta—a common measure of statistical risk in Finance. Specifically, because Beta only uses historical pricing data, Ken says the measure doesn’t effectively assess the current or future risk of a stock or portfolio, which is more important for investors to consider.

Ken also suggests there can be a variety of reasons a stock behaves differently relative to the market over short periods, which affects its Beta. Ken uses an example of an otherwise “stable” stock that might fall more than the market in the later stages of a bear. While the stock’s Beta may rise as a result, Ken says the stock may actually be less risky after the fall than it was before. While Ken understands why Beta was created as part of Modern Portfolio Theory, it ignores the truth that prior price action tells you nothing about future price action.

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Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.