Volatility-Managing International Equity Risk Factors

16 Pages Posted: 8 Mar 2018

See all articles by Klaus Grobys

Klaus Grobys

University of Vaasa; University of Jyväskyla

Janne Jaakko Äijö

University of Vaasa, Department of Accounting and Finance

Date Written: March 8, 2018

Abstract

Recent research (see Moreira and Muir, 2017) suggests that volatility-managed portfolios take less risk when volatility is high produce large alphas, increase Sharpe ratios, and produce large utility gains for mean-variance investors. We extend this literature by investigating the profitability of volatility-managing the Fama and French (2017) local risk factors in international equity markets. Our general findings indicate that volatility-managing adds value for local risk factors in Europe and Asia, whereas in Japan we find no such evidence. Confirming earlier studies, we find that a risk-based story is unlikely to explain our results.

Keywords: asset pricing, risk factors, volatility-managing, risk-managing, global equity markets

JEL Classification: G12, G14

Suggested Citation

Grobys, Klaus and Äijö, Janne Jaakko, Volatility-Managing International Equity Risk Factors (March 8, 2018). Available at SSRN: https://ssrn.com/abstract=3136316 or http://dx.doi.org/10.2139/ssrn.3136316

Klaus Grobys (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Wolffintie 34
FIN-65101 Vaasa
Finland

University of Jyväskyla ( email )

Jyväskyla
Finland

Janne Jaakko Äijö

University of Vaasa, Department of Accounting and Finance ( email )

P.O. Box 700
FIN-65101 Vaasa
Finland

HOME PAGE: http://www.uwasa.fi/~jja

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