Deconstructing the Low-Vol Anomaly

The authors study several aspects of the so-called low-vol and low-β anomalies, some of which are already well documented (such as the universality of the effect over different geographical zones) and others hitherto not clearly discussed in the literature. The most significant message of the articl...

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Veröffentlicht in:Journal of portfolio management Jg. 44; H. 1; S. 91 - 103
Hauptverfasser: Beveratos, Alexios, Bouchaud, Jean-Philippe, Ciliberti, Stefano, Laloux, Laurent, Lempérière, Yves, Potters, Marc, Simon, Guillaume
Format: Journal Article
Sprache:Englisch
Veröffentlicht: London Pageant Media Ltd 01.09.2017
Pageant Media
Schlagworte:
Bias
Capital assets
Construction
Dividends
Efficient markets
Equity
Securities markets
Stock exchanges
Theory
Volatility
ISSN:0095-4918, 2168-8656
Online-Zugang:Volltext
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Zusammenfassung:The authors study several aspects of the so-called low-vol and low-β anomalies, some of which are already well documented (such as the universality of the effect over different geographical zones) and others hitherto not clearly discussed in the literature. The most significant message of the article is that the low-vol anomaly is the result oftwo independent effects. One is the striking negative correlation between past realized volatility and dividend yield. Second is the fact that ex-dividend returns themselves are weakly dependent on the volatility level, leading to better risk-adjusted returns for low-vol stocks. The authors find that this effect is further amplified by compounding. It appears that the low-vol strategy is not associated with short-term reversals, nor does it qualify as a risk premium strategy, because its overall skewness is slightly positive. For practical purposes, the strong dividend bias and resulting correlation with other valuation metrics (such as earnings/price or book/price) do make the low-vol strategies to some extent redundant, at least for equities.
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ISSN:0095-4918
2168-8656
DOI:10.3905/jpm.2017.44.1.091