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The Investor’s Guide to the Low Volatility Anomaly

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Kudos to Tadas (like how that sounds) at Abnormal Returns for his recent blogging and book about what’s know as the low volatility anomaly.

Simply, accepted theory is that higher volatility stocks (ie riskier) should perform better than lower volatility ones over time. You know, the old risk-return tradeoff.

The thing is that in practice, they don’t.

There’s been a growing body of research and interest into this phenomenon and I thought it would be worthwhile to make some order out of this.

The investor’s guide to the low volatility anomaly

Much of the interest into this curious fact has stemmed from academic research.

Academic Research on the low volatility anomaly

Reporting on the low risk volatility anomaly

Illustrations

dylan-grice on the low volatility anomaly

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Discussion

Video

Morningstar: When less risk equals more reward

Tools

Low volatility investment products

  • Russell Developed ex US Low Volatility ETF ($XLVO)
  • iShares MSCI USA Minimum Volatility ETF ($USMV)
  • PowerShares S&P Low Volatility Portfolio ($SPLV)
  • Russell 1000 Low Volatility ($LVOL)
  • Russell 2000 Low Volatility ($SLVY)
  • iShares MSCI All Country World Minimum Volatility Index ($ACWV)
  • Summit Global Investments Low Volatility Equity Fund ($SILVX)

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