An Investor's Low Volatility Strategy
Journal of Index Investing, vol. 3, no. 4, Spring 2013
Posted: 8 Feb 2017
Date Written: March 1, 2013
Investors are displaying a fast-rising appetite for low volatility strategies, given growing academic and empirical evidence of consistent outperformance over the markets from which they are drawn. However, many existing low volatile strategies are optimized, creating biases toward smaller cap stocks and over-concentration in a small number of sectors and/or countries. Instead, we develop a heuristic-based design that leads to a practical portfolio with a superior Sharpe ratio as well as more investor- friendly attributes, including a lower turnover rate, higher investment capacity, relative transparency, and broader market representativeness.
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