"Blackrock" Report Addresses Left Tail Risk Concerns

A new study from three Blackrock authors and one academic addresses a key desire among investors – protecting assets while avoiding volatility going forward. The report noted that protecting assets was more significant in the mind of investors than achieving higher absolute returns. "On behavioral grounds, there is a large body of evidence suggesting that investors fear losses more than they value gains—that is, investors are “loss averse.”

The study, “Portfolio Construction and Tail Risk,” is noted for its work in helping mitigate “left tail” downside risk. It draws the conclusion that during periods of market crisis, volatility and momentum strategies performed the worst while strategies it recommends performed the best. “Volatility portfolio has the worst tail-risk...