The Volatility Effect

In Defense of Optimization: The Fallacy of 1/N

“…Third, Blitz and Van Vliet (2007) suggested a few explanations for why a minimum-variance portfolio would outperform in an inefficient market. They conjectured that investors overpay for risky assets because (1) retail investors like to gamble and (2) investment managers like to outperform at the same time their asset class outperforms (to attract money flowing into the asset class), which means that they prefer high-beta stocks.…”

Low-Risk Investing without Industry Bets

“…There are many closely related forms of lowrisk investing that focus on various measures: market beta Frazzini and Pedersen 2014), total volatility (e.g., Wurgler 2011), residual volatility (e.g., Falkenstein 1994;Ang, Hodrick, Xing, andZhang 2006, 2009;Blitz and van Vliet 2007), 2 the minimum-variance portfolio, 3 and other related measures (for connections between these measures, see Clarke, de Silva, and Thorley 2013). In our study, we focused on market beta because it is the original measure and is most closely linked to economic theory.…”

Returns to Low Risk Investment Strategy

“…We considered equally weighted entire NSE listed equity stocks as proxy to market portfolio (EWI) on similar lines Blitz et al (2007) We used the three-factor and four-factor Fama-French-Carhart regression 3 to test the robustness of the results and the strength of low risk investing strategy. Also, it helped to separate the effect of low risk investing from other effects.…”

“…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.…”