Volatility poses no risk beyond mere discomfort.
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Great explanation. I agree that there seems to be a correlation between high-vol & poor quality, which seems to be why both work as a solid negative pre-screen, sometimes removing the same names. I tie volatility to behavioral risk. Higher vol = Higher behavioral risk.
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Interesting stuff! You've really made me think. How useful have you found the high-vol pre-screen to be at measuring quality in periods of macroeconomic turmoil? I wonder if, broadly speaking, the usefulness of various screens change depending on where we are in the cycle. Hmm...
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