The Volatility Effect Revisited

@inproceedings{Blitz2019TheVE,
  title={The Volatility Effect Revisited},
  author={David Blitz and Pim van Vliet and Guido Baltussen},
  booktitle={Journal of Portfolio Management},
  year={2019}
}
High-risk stocks do not have higher returns than low-risk stocks in all major stock markets. This article provides a comprehensive overview of this low-risk effect, from the earliest asset pricing studies in the 1970s to the most recent empirical findings and interpretations. Volatility appears to be the main driver of the anomaly, which is highly persistent over time and across markets and which cannot be explained by other factors such as value, profitability, or exposure to interest rate… 

Investigating the low-risk anomaly in South Africa

PurposeRecent studies have shown that low-volatility shares outperform high-volatility shares. Given the conventional finance theory that risk drives return, this study aims to investigate and

An Investigation of the Beta Anomaly in Emerging Markets: A South African Case

High-risk stocks tend to provide lower returns than low-risk stocks on a risk-adjusted basis. These results (referred to as the low-beta anomaly) run counter to theoretical expectations. This paper

Tail Risk Targeting: Target VaR and CVaR Strategies

We present dynamic trading strategies that target a predefined level of risk measured by volatility, Value-at-Risk (VaR) or Conditional-Value-at-Risk (CVaR). Recent studies have shown that volatility

Fact and Fiction about Low-Risk Investing

Low-risk investing within equities and other asset classes has received a lot of attention over the past decade. An intensive academic debate has spurred, and been spurred by, the growing market for

Analysis of the Capital Asset Pricing Model: Application to General Electric Performance

In the world of investment, the essential question is, to what degree does the risk of a security influence its expected return? The Capital Asset Pricing Model (CAPM) helps in answering this

Price nonsynchronicity, idiosyncratic risk, and expected stock returns in China

Abstract We are the first to examine the pricing of relative idiosyncratic risk, or price nonsynchronicity, in the Chinese equity market. Using several tests, we investigate returns on more than 2700

The Cross Section of Country Equity Returns: A Review of Empirical Literature

  • Adam Zaremba
  • Economics
    Journal of Risk and Financial Management
  • 2019
The last three decades brought mounting evidence regarding the cross-sectional predictability of country equity returns. The studies not only documented country-level counterparts of well-established

Media Attention and the Volatility Effect

Stocks with low return volatility have high risk-adjusted returns, which might be driven by low media attention for such stocks. Using news coverage data we formally test whether the

When Equity Factors Drop Their Shorts

Although factor premiums originate in both long and short legs of factor portfolios, we found that (1) most added value comes from the long legs, (2) the long legs offer more diversification than the

References

SHOWING 1-10 OF 137 REFERENCES

Low-Volatility Cycles: The Influence of Valuation and Momentum on Low-Volatility Portfolios

Research showing that the lowest-risk stocks tend to outperform the highest-risk stocks over time has led to rapid growth in so-called low-risk equity investing in recent years. The authors examined

The Volatility Effect

There is empirical evidence that stocks with low historical volatility have high risk-adjusted returns, with annual alpha spreads of global low-versus high-volatility decile portfolios of 12

International Low-Risk Investing

This article comprehensively examines the performance, investment behavior, and co-movement of minimum-volatility, low-volatility, and low-beta strategies in international markets. First, the authors

A Study of Low-Volatility PortfolioConstruction Methods

In this study, the authors examine the hypothetical performance of various low volatility strategies in historical U.S., global developed, and emerging markets. The strategies we replicated

The Limits to Arbitrage and the Low-Volatility Anomaly

The authors found that over 1963–2010, the existence and trading efficacy of the low-volatility stock anomaly were more limited than widely believed. For example, they found no anomalous returns for

Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly

Contrary to basic finance principles, high-beta and high-volatility stocks have long underperformed low-beta and low-volatility stocks. This anomaly may be partly explained by the fact that the

The Cross-Section of Volatility and Expected Returns

We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consistent with theory, we find that stocks with high sensitivities to innovations in aggregate volatility

Interest Rate Exposure of Volatility Portfolios

The authors assess the exposure of stock portfolios sorted by total volatility to interest rate risk and determine whether this nonequity risk can explain differences in risk and risk-adjusted

The Profitability of Low Volatility

Low-risk stocks exhibit higher returns than predicted by established asset pricing models, but this anomaly seems to be explained by the new Fama-French five-factor model, which includes a

Low Risk Stocks Outperform within All Observable Markets of the World

This article provides global evidence supporting the Low Volatility Anomaly: that low risk stocks consistently provide higher returns than high risk stocks. This study covers 33 different markets
...