[ Trading Fact ] When Invest in Stock, No News is Good News

  • Investors prefer stocks where they have more information
  • More news on a stock can be a signal of events and volatility

When investors seeking stable returns, it’s better to buy companies that aren’t in Front Pages or the spotlight. The secret from a head of quantitative equity management is investing in stocks that seldom get any attention in the media.

People are attracted by companies where they get a lot of information. They tend to prefer more volatile stocks for this reason. If you have a lot news on a company it means there are events and there’s volatility. Low volatility stocks should have a higher risk-adjusted return than high volatility stocks because of behavioral biases. Investors prefer more volatile stocks and that will reduce the expected future returns. By investing in low vol stocks you would expect more return.