Low Volatility Investing

Low-Volatility or Low-Beta Research

Swedroe Spotlight: Explaining the Low Risk Effect

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.

Why The Low-Volatility Anomaly Exists

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 [...]

How to Calculate Volatility in Excel

Wild-swinging oil prices have caused some chaos, or "volatility," in the financial markets recently. We've also heard a lot in the financial media regarding the [...]

Low Volatility Anomaly Lacks Robustness?

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 [...]

Low Beta/Vol Outperformance

There are many blogs/funds/research promoting low beta stocks as a way to get rich: A blog example --Falken A fund example --AQR Defensive Fund A [...]

Make 24bps a week trading skewness?

That is what Amaya, Christofferson, Jacobs, and Vasquez find. We use intraday data to compute weekly realized variance, skewness, and kurtosis for equity returns and [...]

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