The Low Risk Anomaly: A Decomposition into Micro and Macro Effects
38 Pages Posted: 1 Feb 2013 Last revised: 14 Sep 2013
Date Written: September 13, 2013
Low beta stocks have offered a combination of low risk and high returns. We decompose the anomaly into micro and macro components. The micro component comes from the selection of low beta stocks. The macro component comes from the selection of low beta countries or industries. The two parts both contribute to the low beta anomaly, with important implications for the construction of managed volatility portfolios.
Keywords: low volatility, beta, portfolio construction, market efficiency, capital asset pricing model
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation