Bridge over ocean
1 September 2002 Financial Analysts Journal Volume 58, Issue 5

Cross-Sectional Volatility and Return Dispersion

  1. Ernest M. Ankrim
  2. Zhuanxin Ding

In the past few years, the return spread between successful and unsuccessful active managers has increased dramatically. We analyzed how levels of cross-sectional volatility correspond to active manager dispersion in the U.S. and other equity markets. We demonstrate that changes in the level of cross-sectional volatility have a significant association with the distribution of active manager returns. We further show that these observations are neither unique to U.S. equities nor merely a product of the “technology bubble”; they are observable in several equity markets.

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