Varying cross-sectional volatility in the South African equity market and the implications for the management of fund managers
Journal Article
2011
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South African Journal of Business Management
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APM
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University of Cape Town
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Faculty
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Abstract
Modern portfolio theory is founded on an understanding of longitudinal volatility but it is the cross-sectional dispersion among investment returns that provide active portfolio managers with their competitive investment opportunities. The varying cross-sectional volatility in the South African equity market provides varying opportunity sets for active managers: the higher the cross-sectional volatility, the greater the opportunity for active risk taking, all other things being equal. This article argues that cross-sectional volatility must be considered hand-in-hand with risk limits and active risk targets when investment mandates are set and when mandated risk compliance is monitored.
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Reference:
Raubenheimer, H. (2011). Varying cross-sectional volatility in the South African equity market and the implications for the management of fund managers. South African Journal of Business Management, 42(2):15-25.