“High risk, high reward” is the stock market’s version of “no pain, no gain.” But a closer look at the numbers sheds a slightly different light on this age-old tenet of investing.

An article in last week’s Economist described some uncanny findings presented in a paper by Malcom Baker of Harvard Business School. Baker studied two separate stock portfolios since 1967; one consisted of 30% low-beta stocks (low-volatility) and the other of 30% high-beta stocks. While one would have expected the more volatile of the two portfolios to show the higher returns, the opposite happened. By the end of the study period, the low-beta portfolio had nearly doubled, while the high-beta portfolio had grown by only 18%. Lower risk, therefore, actually translated into higher reward.

How could this be? One academic theory suggests supply and demand as the culprit, whereby fund managers who wanted to deliver higher than average returns to investors flocked to high-beta stocks. The higher demand raised prices which, in turn, lowered investor returns.

Another study looked at the rise in popularity of tracker funds (such as ETF’s), which are appealing because they reduce the risk associated with individual stocks. However, the low-risk appeal of these funds may actually have the opposite effect in the long run. As dollars rush in and out, fund managers react by buying or selling component stocks and, effectively, making the share prices more volatile.

On the whole, however, equities still outperform the traditionally safer investments such as T-bills, so investors still do get compensated for taking on stock market risk.