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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, August 24, 2006

Risk versus Return for Growth and Value Stocks

From 1928-2000 you can examine the risk and rewards of growth and value stocks. We will look at large cap growth and large cap value as well as small cap growth and small cap value. The rule of themb is the more risk the more reward should go along with it. However, it is always necessary so we examing the numbers.

Small cap value stocks had the highest return (14%) and risk, or standard deviation (35%). However, small cap growth had a return a little over 9% and risk was measured at almost 31%. Large cap value had the second best returns at close to 13% and risk at 30%. Large cap growth stocks returned 10% and 21% risk. This does not follow how it should be according to the ideas of risk and reward, but it is interesting to see the numbers over a long time horizon.


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