Interest Rate Exposure of Volatility Portfolios

Franco, Carmine De; Monnier, Bruno; Rulik, Ksenya

doi:10.3905/jii.2017.8.2.053

JII

2017

DOI: 10.3905/jii.2017.8.2.053

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Interest Rate Exposure of Volatility Portfolios

Carmine De Franco¹,

Bruno Monnier²,

Ksenya Rulik³

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Cited by 9 publications

References 13 publications

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What we know about the low-risk anomaly: a literature review

Traut¹

2023

Financ Mark Portf Manag

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It is well documented that less risky assets tend to outperform their riskier counterparts across asset classes. This paper provides a structured summary of the current state of literature regarding this so-called low-risk anomaly. It provides an overview of empirical findings across implementation methodologies and asset classes. Furthermore, it presents the most prevailing causes, which are namely exposure to other factors, coskewness risk, investor constraints, behavioral biases, and agency problems. The paper concludes that despite some critiques there are good reasons to believe that the low-risk anomaly can be evaluated as an investment factor. It also identifies that more research is required to disentangle the proposed causes to fully understand the big picture of the anomaly with certainty.

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What we know about the low-risk anomaly: a literature review

Traut¹

2023

Financ Mark Portf Manag

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The Volatility Effect in China

Blitz¹,

Hanauer

Vliet³

2021

J Asset Manag

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This paper shows that low-risk stocks significantly outperform high-risk stocks in the local China A-share market. The main driver of this low-risk anomaly is volatility, and not beta. A Fama–French style VOL factor is not explained by the Fama–French–Carhart factors, and has the strongest stand-alone performance among all these factors. Our findings are robust across sectors and over time, and consistent with previous empirical evidence for the US and international markets. Moreover, the VOL premium exhibits excellent investability characteristics, as it involves a low turnover and remains strong when applied to only the largest and most liquid stocks. Our results imply that the volatility effect is a highly pervasive phenomenon, and that explanations should be able to account for its presence in highly institutionalized markets, such as the US, but also in the Chinese market where private investors dominate trading.

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The Volatility Effect Revisited

Blitz¹,

Vliet²,

Baltussen

2019

SSRN Journal

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Interest Rate Exposure of Volatility Portfolios

Cited by 9 publications

References 13 publications

What we know about the low-risk anomaly: a literature review

What we know about the low-risk anomaly: a literature review

The Volatility Effect in China

The Volatility Effect Revisited

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