Loans in senior banks are less volatile
By admin, November 2nd, 2009,in money tips, payday loans, personal finances, pricing policy, revenue | Comments Off
It can be stated that senior banks were less volatile than the telecommunications and automobile sectors. Especially the automobile sector and subordinated insurance increase the risk profile of a portfolio due to higher volatility and offer more potential to outperform/underperform the corporate benchmark if an overweighting is targeted. Services noncyclical and technology appear unattractive as they offer a relative low spread and a high spread volatility. The media, telecom and services cyclical sectors have an attractive risk-return profile and consequently should be overweight in a portfolio. The different spread volatilities of the sectors lead to divergent investor behavior regarding risk aversion /appetite, which in return results in different risk premia (spreads).
The rating differences between the various sectors have to be considered as well because in this example we compare AA-rated financials with low A/high BBB-rated telecommunication and automobile companies.