The Low Volatility Effect: A Comprehensive Look

19 Pages Posted: 13 Aug 2012

Date Written: August 1, 2012

Abstract

We analyze the low volatility effect in the U.S equity market with a focus on the common properties of various low volatility strategies. We examine the two major approaches to constructing low volatility portfolios and apply them to the U.S. equity market: mean-variance optimization-based versus the rankings or quantile-based approaches. Our analysis shows that both approaches are equally effective in reducing portfolio volatility over a long-term investment horizon. We then extend our analysis to the international and emerging markets. Our findings confirm that the low volatility effect is not unique to the U.S. equity markets; it is present on a global scale.

Keywords: Volatility effect, low volatility, minimum variance portfolio, low risk investing

Suggested Citation

Soe, Aye M., The Low Volatility Effect: A Comprehensive Look (August 1, 2012). Available at SSRN: https://ssrn.com/abstract=2128634 or http://dx.doi.org/10.2139/ssrn.2128634

Aye M. Soe (Contact Author)

Standard & Poor's ( email )

London EC2M 7NJ
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
896
Abstract Views
3,925
rank
30,347
PlumX Metrics