Low-Volatility or Low-Beta Research

Volatility Targeting Improves Risk-Adjusted Returns

By |May 22nd, 2019|Research Insights, Larry Swedroe, Other Insights, Low Volatility Investing, Tactical Asset Allocation Research|

There’s a large body of research, including the 2017 study “Tail Risk Mitigation with Managed Volatility Strategies” by Anna Dreyer and Stefan Hubrich, that demonstrates that, while past returns do not predict future returns, past [...]

Volatility Anomalies: IVOL and Vol-of-Vol

By |May 21st, 2019|Research Insights, Factor Investing, Larry Swedroe, Low Volatility Investing|

Two of the more interesting puzzles in finance are related to volatility—stocks with greater idiosyncratic volatility (IVOL) have produced lower returns and stocks with high uncertainty about risk, as measured by the volatility of expected [...]

Low Volatility Can Be Low Turnover

By |February 25th, 2019|Research Insights, Basilico and Johnsen, Low Volatility Investing|

Low Volatility Needs Little Trading Pim van Vliet Journal of Portfolio Management A version of this paper can be found here Want to read our summaries of academic finance papers? Check out our Academic Research Insight [...]

Video: Alpha Architect Weekly Research Recap (Jack & Ryan)

By |September 14th, 2018|Research Insights, Podcasts and Video, Academic Research Insight, Weekly Research Recap Videos, Low Volatility Investing|

You can watch the video via the link below: Video Summary Ryan and I discuss three articles published on our blog this week. First, we examine a summary by Larry Swedroe that highlights the Betting [...]

How Leverage Constraints Effect Mutual Fund Risk Taking

By |September 13th, 2018|Research Insights, Factor Investing, Larry Swedroe, Low Volatility Investing|

The 2014 study by Andrea Frazzini and Lasse Heje Pedersen, “Betting Against Beta,” found strong support for low-beta strategies. I’ve previously written on low-beta strategies here. This paper finds that, for U.S. stocks, the betting [...]

The Conservative Formula: Quantitative Investing made Easy

By |September 11th, 2018|Research Insights, Factor Investing, Value Investing Research, Momentum Investing Research, Low Volatility Investing|

The Conservative Formula: Quantitative Investing made Easy Pim van Vliet and David Blitz A version of this paper can be found here. Want to read our summaries of academic finance papers? Check out our Academic Research Insight category. [...]

Deconstructing the Low Volatility/Low Beta Anomaly

By |July 12th, 2018|Research Insights, Low Volatility Investing, Active and Passive Investing|

One of the big problems for the first formal asset pricing model developed by financial economists, the Capital Asset Pricing Model (CAPM), was that it predicts a positive relationship between risk and return. However, the [...]

Explaining the Beta Anomaly

By |June 28th, 2018|Research Insights, Low Volatility Investing, Active and Passive Investing|

The superior performance of low-beta and low-volatility stocks was documented in the literature back in the 1970s — by Fischer Black (in 1972) among others — even before the size and value premiums were “discovered.” [...]

Investor Attention and the Low Volatility Anomaly

By |May 24th, 2018|Research Insights, Low Volatility Investing, Active and Passive Investing|

One of the big problems for the first formal asset pricing model developed by financial economists, the Capital Asset Pricing Model (CAPM), was that it predicts a positive relationship between risk and return. However, the [...]

Explaining the Demand for Higher Beta Stocks

By |May 17th, 2018|Research Insights, Low Volatility Investing, Active and Passive Investing|

The Capital Asset Pricing Model (CAPM) indicates returns should go up linearly as beta increases (in other words, risk and return are positively related). However, as I’ve previously discussed, the historical evidence demonstrates that, while [...]

Are Factors Better and More Diversifying Than Asset Classes?

By |February 23rd, 2018|Factor Investing, Trend Following, Guest Posts, Low Volatility Investing|

Executive Summary Factor investing promises outperformance at low cost. But to add value in a portfolio, it must deliver positive risk-adjusted returns and with low correlation to existing holdings. Historically, pure factor exposures have earned [...]

Swedroe Spotlight: Explaining the Low Risk Effect

By |February 21st, 2017|Research Insights, Larry Swedroe, Guest Posts, Low Volatility Investing|

Before proceeding, it’s important to note that beta and volatility are related, though not the same. Beta depends on volatility and correlation to the market, whereas volatility is related to idiosyncratic risk (see here for an explanation of how to calculate the different measures). The superior performance of low-volatility and low-beta stocks was first documented in the literature in the 1970s — by Fischer Black (in 1972) among others — even before the size and value premiums were “discovered.” And the low-volatility anomaly has been shown to exist in equity markets around the world. Interestingly, this finding is true not only for stocks, but for bonds as well. In other words, it has been pervasive.

Will ETFs Destroy Factor Investing? Nope.

By |February 17th, 2017|Research Insights, Factor Investing, Guest Posts, Value Investing Research, Momentum Investing Research, Low Volatility Investing, Size Investing Research|

One of the popular investing truisms is the following (inspired by Bill Sharpe): For somebody to beat the market (win) someone else has to lag the market (lose). This becomes an even more daunting (efficient [...]

Is the Low Volatility Anomaly driven by Lottery Demand?

By |November 30th, 2016|Research Insights, Low Volatility Investing|

A few years ago I wrote a summary on a working paper titled "A Lottery Demand-Based Explanation of the Beta Anomaly." The paper is still a working paper, and has been updated (unfortunately they took [...]

An Evidence-Based Low Volatility Investing Discussion

By |November 16th, 2016|Research Insights, Low Volatility Investing|

Jack and I had the honor of attending the Evidence-Based Investing conference, hosted by the team at Ritholz Wealth Management. Wow. What a great event and a great group of inspiring investors and thinkers. Abe, Meb, [...]

Predicting Booms and Busts in Low Volatility Strategies

By |September 27th, 2016|Research Insights, Low Volatility Investing|

Low volatility funds are some of the best performers in the market these days. As such, they have attracted renewed attention in addition to significant asset flows. (note: a refresher on low volatility investing is here, h.t. Eric [...]

Not so Simple: Valuations and Low Volatility Strategies

By |May 17th, 2016|Low Volatility Investing|

Low volatility funds are everywhere. The reasons for their proliferation are clear: Who wouldn't want to own something with the label "low volatility" and Recent performance has been great. Open the AUM floodgates! But perhaps [...]

Tactical Asset Allocation and Low Volatility Stocks

By |April 13th, 2015|Research Insights, Low Volatility Investing, Tactical Asset Allocation Research|

Investing in strategies that exploit the low volatility anomaly have grown in popularity in recent years.  While low volatility based strategies may or may not beat the return of a market cap weighted index, by construction, [...]

Why The Low-Volatility Anomaly Exists

By |March 5th, 2015|Research Insights, Low Volatility Investing|

Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly Baker, Bradley and Wurgler A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. [...]

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