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Does Higher Risk Really Mean Higher Return?

Equity investors looking for higher returns should consider low-volatility, less liquid stocks, which outperform their higher-risk peers over the long term, says Zebra Capital chairman Roger Ibbotson.

Does Higher Risk Really Mean Higher Return?

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. I'm here at the Morningstar Ibbotson Conference, and I had the opportunity to sit down with [Zebra Capital chairman] Roger Ibbotson, who discussed some research he presented at the conference about the potential for low-volatility stocks to outperform.

Roger, you presented some research [at the conference], and you looked at the traditional risk/return relationship between asset classes. What the data show are that if you are in higher-risk asset classes like equities you tend to outperform over time. Correct?

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