Abstract

http://ssrn.com/abstract=2320264
 


 



Restoring Value to Minimum Variance


Lisa R. Goldberg


University of California, Berkeley; Aperio Group

Ran Leshem


Aperio Group

Patrick Geddes


Aperio Group

November 25, 2013

Forthcoming in Journal of Investment Management

Abstract:     
A long-only investable minimum variance strategy outperformed the S&P 500 over the four decades from January 1973 to December 2012. Through the lens of a factor model, we show this outperformance can be largely attributed to implicit style bets. Specifically, minimum variance has thrived by tilting away from size and volatility and toward value. As funds have poured into minimum variance in the wake of the financial crisis, and plausibly as a consequence of this trend, the value tilt has disappeared and a momentum tilt has emerged. This suggests that the cost of entry to minimum variance is at an historic high. We show how the value tilt can be restored to minimum variance by targeting specific exposures, and that there was a substantial long-term benefit to the restoration at most recent points of entry to the strategy.

Number of Pages in PDF File: 12

Keywords: minimum variance, low risk, value factor

JEL Classification: G11, G12

Accepted Paper Series


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Date posted: September 5, 2013 ; Last revised: November 26, 2013

Suggested Citation

Goldberg, Lisa R. and Leshem, Ran and Geddes, Patrick, Restoring Value to Minimum Variance (November 25, 2013). Forthcoming in Journal of Investment Management. Available at SSRN: http://ssrn.com/abstract=2320264 or http://dx.doi.org/10.2139/ssrn.2320264

Contact Information

Lisa R. Goldberg (Contact Author)
University of California, Berkeley ( email )
Department of Statistics
367 Evans Hall
Berkeley, CA 94720-3860
United States
Aperio Group ( email )
3 Harbor Drive
Suite 315
Sausalito, CA 94965
United States
Ran Leshem
Aperio Group ( email )
3 Harbor Drive
Suite 315
Sausalito, CA 94965
United States
Patrick Geddes
Aperio Group ( email )
3 Harbor Drive
Suite 315
Sausalito, CA 94965
United States
HOME PAGE: http://www.aperiogroup.com
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