Question: How many ETF companies are hawking “Smart” beta products that offer low volatility or low beta portfolios (we could probably throw minimum volatility in this basket as well)

Answer: All of them

Another Question: How many ETF companies are concerned about the robustness of the products they are hawking?

Answer: Not many.

Here is a simple study on the low volatility anomaly using out of sample data on the Indian stock market.

The evidence suggests the low volatility anomaly is not a panacea:

Theory suggests a direct relationship between risk and return. But several empirical studies find that portfolio of low volatility stocks outperforms portfolio of high volatility stocks. This is termed as low risk anomaly. Our objective is to study whether low risk anomaly exists in India. Using data for the sample period running from January 1994 to June 2010 we find that high volatility quintile yields high return in India.


Nothing works all the time and every time, but robust alpha drivers should show some semblance of robustness in out of sample tests.

  • The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).
  • Join thousands of other readers and subscribe to our blog.
  • This site provides NO information on our value ETFs or our momentum ETFs. Please refer to this site.

Print Friendly, PDF & Email