32 Pages Posted: 13 Jan 2011 Last revised: 16 Jul 2016
Date Written: March 11, 2013
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.
Keywords: low-volatility stocks, market, risk, mispricing
Suggested Citation: 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 72 (1), 36-47, January/February 2016. Available at SSRN: https://ssrn.com/abstract=1739227 or http://dx.doi.org/10.2139/ssrn.1739227
By Andrew Ang