No Safe Harbor for Stockpickers

We can use volatility and its components dispersion and correlation to analyze stock selection conditions globally. Most active managers run less diversified, more volatile portfolios than their index counterparts.

Active managers should prefer above-average dispersion because stock selection skill is worth more when dispersion is high. The role of correlation is more subtle. While counterintuitive, the benefit of diversification is less when correlations are high.

You can now read the full whitepaper at the link below