Aim is always likely to experience a sharp decline in an
economic downturn. John Cowie discusses the relative performance of
media sub-sectors.
It will be no surprise to anyone that Aim has performed badly
over the past few months. Indeed, the FTSE Aim All-Share Index has
suffered a much sharper decline in the last 12 months (down 58%)
than that of the Main Market (the FTSE All- Share is down a
'mere' 40% as we go to press).
This is exactly what economists would expect in a downturn from
a market that seeks to attract growth businesses: the beta of their
constituent companies ought, on average, to be greater than one. In
other words, they should demonstrate higher volatility than a
basket of 'normal' (for which read larger, established
company) shares. To put it another way, in the good times, Aim
should outperform the Main Market, rewarding greater risk with
greater return. In the bad times, it should fall more sharply than
the Main Market.
