Low Risk Stocks Outperform in All Observable Markets

“Low Risk Stocks Outperform within All Observable Markets of the World” is the final research paper by Nardin L. Baker and Robert A. Haugen, written in April 2012. It is the document most often cited on this site, and the archive described a companion spreadsheet with the data behind it.

What the paper examines

The authors compared the least risky stocks with the most risky ones in markets worldwide, emerging markets included. They report that between 1990 and 2011 the lower-risk group earned higher returns than the higher-risk group in every market they looked at. The scatter chart on the home page plots risk against return for the lowest and highest risk deciles over that period and shows the two groups sitting in clearly different places. The paper also sets out reasons why this might occur.

Where it fits in the research

The work follows earlier studies by Haugen and A. James Heins, who used data from 1926 onward, and the later papers summarised on the research page. Its title states the thesis directly, and it was meant as the closing statement of Haugen’s research career.

The accompanying spreadsheet

The archived page offered an Excel file with the underlying figures.

• Neither author could provide consulting help with the spreadsheet.
• Excel 2010 was recommended, because certain macros may not run in older versions.
• The file was large and could take two to three minutes to download.

Caution

A research paper describes historical averages. It does not forecast future returns, and this summary is not investment advice. For the author’s life and work, see his biography.