The Low Volatility Effect: A Comprehensive Look

Soe, Aye M.

doi:10.2139/ssrn.2128634

Cited by 7 publications

(3 citation statements)

References 13 publications

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“…Further, Haugen and Heins (1975), Haugen and Baker (1991), Haugen and Baker (1996), Clarke et al (2006), Blitz and Vliet (2005) and Frazzini and Pedersen (2014) offer evidence on the negative relation between risk and return. Among others, Choueifaty and Coignard (2008), , , Soe (2012), Carvalho et al (2012) also find evidence for low-risk anomaly. Blitz et al (2013) find similar evidence for emerging markets as well.…”

Section: Review Of Literature and Potential Explanationsmentioning

confidence: 91%

The Volatility Effect: Evidence from India

Joshipura¹,

Joshipura²

2016

AFL

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We offer empirical evidence that stocks with low volatility earn higher risk-adjusted returns compared to high volatility stocks in the Indian stock market. The annualised excess returns for the low and high volatility decile portfolios amount to 11.40% and 1.30%, respectively, over the period January 2001 to June 2015. The difference of returns is statistically and economically significant for both low and high-risk stocks. Using risk measures of standard deviation and beta, the volatility effect remains after controlling for size, value and momentum. We uncover that the volatility effect is not statistically significant after controlling for beta effect. Our evidence for volatility effect is not dominated by small and illiquid stocks. Our results show that the low volatility portfolio outperforms benchmark portfolio not only in down market but also in up market conditions.

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Section: Review Of Literature and Potential Explanationsmentioning

confidence: 91%

The Volatility Effect: Evidence from India

Joshipura¹,

Joshipura²

2016

AFL

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“…Soe (Soe, 2012) tests the low-risk anomaly in different markets and across various market cap stocks to find that the low-volatility effect is not unique to the U.S. equity markets; it is present on a global scale.…”

Section: Asian Journal Of Finance and Accountingmentioning

confidence: 99%

Risk Anomaly: A Review of Literature

Joshipura

Joshipura²

2015

AJFA

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<p>Number of studies show that portfolio of low risk stocks outperform portfolio of high risk stocks as well as the market portfolio over the full market cycle on risk adjusted basis and in some cases, absolute basis as well in some cases. This surprising contradiction to classic finance theory led by CAPM has held its ground over long periods of time, across different markets and different methodological choices. This review paper aims at contributing to the body of knowledge in four ways. One, it highlights and links different strands of literature on low risk anomaly that has evolved over a period of time. Second, it highlights, different methodological choices that have been used. Third, it classifies explanations for persistence of risk anomaly in to economic and behavioral explanations and explanations that try to explain the anomaly away. Fourth, it reviews the state of current research and explores potential but yet underexplored areas of research on risk anomaly.</p>

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“…Studies conducted by Haugen & Heins (1975), Blitz and Vliet (2007), Clarke, De Silva and Thorley (2006), Ang, Hodrick, Xing and Zhang (2006, 2009), Baker, Bradley and Wurgler (2011), Soe (2012, Baker and Haugen (2012), Blitz, Pang and Vliet (2013) and Frazzini and Pedersen (2014) found that the historical returns of low-risk securities were higher than high-risk securities.…”

Section: Introductionmentioning

confidence: 98%

Returns to Low Risk Investment Strategy

Peswani¹

2017

AFL

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Abstract:The paper studies the low-risk anomaly in the Indian equity market represented by stocks listed on National Stock Exchange (NSE) for the period January 2001 to June 2016. The study provides evidence that lowrisk portfolio returns are robust across various risk measures as well as market cap buckets though the intensity of the returns differs. The returns from low-risk investment are not only economically but also statistically significant. They outperform the high-risk portfolio as well as the benchmark portfolio. They deliver higher returns even after controlling for the well-known size, value and momentum factors. The returns are highest for low-risk large cap stocks portfolio sorted for stock volatility as a risk measure. Most of the low-risk portfolios consist of growth and winner stocks. The study provides a framework for an implementable low risk investing strategy.

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The Low Volatility Effect: A Comprehensive Look

Cited by 7 publications

References 13 publications

The Volatility Effect: Evidence from India

The Volatility Effect: Evidence from India

Risk Anomaly: A Review of Literature

Returns to Low Risk Investment Strategy

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