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http://ssrn.com/abstract=1739227
 
 

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The Low-Volatility Anomaly: Market Evidence on Systematic Risk versus Mispricing


Xi Li


Hong Kong University of Science & Technology

Rodney N Sullivan


AQR Capital Management

Luis García-Feijóo


Florida Atlantic University - Department of Finance

March 11, 2013

Financial Analysts Journal, Forthcoming

Abstract:     
We explore whether the well publicized anomalous returns associated with low-volatility stocks can be attributed to market mispricing or to compensation for higher systematic risk. Our results, conducted over a 46 year study period (1966- 2011), indicate that the high returns related to low-volatility portfolios cannot be viewed as compensation for systematic factor risk. Instead, the excess returns are more likely to be driven by market mispricing connected with volatility as a stock characteristic.

Number of Pages in PDF File: 30

Keywords: low-volatility stocks, market, risk, mispricing

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Date posted: January 13, 2011 ; Last revised: June 19, 2014

Suggested Citation

Li, Xi and Sullivan, Rodney N and García-Feijóo, Luis, The Low-Volatility Anomaly: Market Evidence on Systematic Risk versus Mispricing (March 11, 2013). Financial Analysts Journal, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1739227 or http://dx.doi.org/10.2139/ssrn.1739227

Contact Information

Xi Li
Hong Kong University of Science & Technology ( email )
Clearwater Bay
Kowloon
Hong Kong
Rodney N Sullivan (Contact Author)
AQR Capital Management ( email )
Two Greenwich Plza
Greenwich, CT 06830
United States
HOME PAGE: http://www.aqr.com/Home.aspx
Luis Garcia-Feijoo
Florida Atlantic University - Department of Finance ( email )
777 Glades Rd
Boca Raton, FL 33431
United States
954-236-1239 (Phone)
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