Volatility Managed Portfolios

@article{Moreira2016VolatilityMP,
  title={Volatility Managed Portfolios},
  author={Alan Moreira and Tyler Muir},
  journal={Mutual Funds},
  year={2016}
}
Managed portfolios that take less risk when volatility is high produce large alphas, substantially increase factor Sharpe ratios, and produce large utility gains for mean-variance investors. We document this for the market, value, momentum, profitability, return on equity, and investment factors in equities, as well as the currency carry trade. Volatility timing increases Sharpe ratios because changes in factor volatilities are not offset by proportional changes in expected returns. Our… Expand
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