Volatility-Managing International Equity Risk Factors
16 Pages Posted: 8 Mar 2018
Date Written: March 8, 2018
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: Suggested Citation