This situation is exacerbated by the fact that an investor can unknowingly accept inadvertent risks. For example, a strategy of selecting high-growth stocks may entail substantial exposure to business cycle risk, an exposures that greatly exceeds that of standard growth investments. Unless this exposure to business cycle risk is recognized, measured, and controlled, a high-growth strategy will underperform whenever there is a surprise downturn in economic activity.
Our solver is designed to help an investor measure and control a portfolio's
exposures to risk, relative to the desired return. It quantifies the risks which may
have been hidden from view. This improved disclosure of risk will enable
investors to better understand their exposure to risk, and its cost component of
their returns.
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