Is There a Low-Risk Anomaly Across Countries?

Eurasian Economic Review, 2016, 69(1), 45-65.

21 Pages Posted: 31 Dec 2014 Last revised: 10 May 2016

See all articles by Adam Zaremba

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business

Date Written: December 29, 2014

Abstract

The aim of this paper is to examine country-level parallels to the stock-level low-risk anomaly. The inter-market variation in returns do not follow the intra-market patterns. The country-level returns are positively related to standard deviation, value at risk, and idiosyncratic volatility, although the effect is largely explained by cross-national value, size and momentum effects. The risk-return links seem stronger for idiosyncratic risk and almost non-existent for systematic risk (market beta). Furthermore, an additional sorting on value at risk can markedly improve the performance of country-level size and value strategies. The investigations are based on a cross-section of 78 national stock markets for years 1999-2014.

Keywords: low risk anomaly, beta, standard deviation, value at risk, idiosyncratic volatility, inter-market effects, cross-section of returns, factor returns, international diversification, country selection strategies, factor investing

JEL Classification: G11, G12, G15

Suggested Citation

Zaremba, Adam, Is There a Low-Risk Anomaly Across Countries? (December 29, 2014). Eurasian Economic Review, 2016, 69(1), 45-65., Available at SSRN: https://ssrn.com/abstract=2543501 or http://dx.doi.org/10.2139/ssrn.2543501

Adam Zaremba (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000
France

Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

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