Risk-Adjusted Monthly Performance
Stocks, Bonds, Gold, and Bitcoin
Yesterday, we looked at monthly performance for stocks, bonds, gold, bitcoin, and home prices. However, return is just one aspect of an investment. Risk is another consideration.
We can compare return and risk in a few ways but one common approach is to take average daily changes divided by the standard deviation of those changes (essentially volatility). We can’t do that with home prices since we only get one monthly observation, as opposed to daily returns, but let’s see how things look for the other four assets:
That’s a lot of data. So, it might be easier to just consider one month:
What we see is a surprising similarity in stocks, bonds, and gold and an even more surprising relative outperformance by bitcoin! Who would’ve thought that the risky cryptocurrency would look so much better when its returns were adjusted for risk!
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