Abstract

https://ssrn.com/abstract=2302453
 
 

References (29)



 


 



Minimum-Variance Stock Picking - A Shift in Preferences for Minimum-Variance Portfolio Constituents


Thomas Dangl


Vienna University of Technology

Michael Kashofer


Vienna University of Technology

August 25, 2013


Abstract:     
Minimum-variance (equity) portfolio selection is increasingly popular among investors. We study a broad set of 63 different, commonly used approaches to build long-only minimum-variance portfolios among US as well as European stocks. We focus on the stock picking characteristics of minimum-variance approaches and find a high degree of consensus across different methods regarding the selection of particular stocks. Hence, the increasing demand for low-volatility equity strategies translates into increasing demand for a rather small subset of stocks, independent of the particular portfolio approach one employs. Further, we analyze the price-to-book multiples of minimum-variance portfolio constituents over the past 23 years (for S&P 500 stocks, and 13 years for STOXX Europe 600 stocks, respectively) and report a gradual shift in preference for these stocks over time. While in the 1990s, minimum-variance constituents traded at a discount (below-average price-to-book), today they trade at a considerable premium, up to 23% in the US (S&P 500) and up to 40% in Europe (STOXX Europe 600).

Number of Pages in PDF File: 40

Keywords: minimum-variance portfolios, stock selection, valuation anomalies


Open PDF in Browser Download This Paper

Date posted: August 10, 2013 ; Last revised: August 25, 2013

Suggested Citation

Dangl , Thomas and Kashofer, Michael, Minimum-Variance Stock Picking - A Shift in Preferences for Minimum-Variance Portfolio Constituents (August 25, 2013). Available at SSRN: https://ssrn.com/abstract=2302453 or http://dx.doi.org/10.2139/ssrn.2302453

Contact Information

Thomas Dangl (Contact Author)
Vienna University of Technology ( email )
Theresianumgasse 27
Vienna, A-1040
Austria
Michael Kashofer
Vienna University of Technology ( email )
Theresianumgasse 27
Vienna, 1040
Austria
Feedback to SSRN


Paper statistics
Abstract Views: 1,388
Downloads: 393
Download Rank: 57,736
References:  29