The Volatility Effect Revisited

The Journal of Portfolio Management, 46(2).

27 Pages Posted: 26 Aug 2019 Last revised: 13 Sep 2023

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Pim van Vliet

Robeco Quantitative Investments

Guido Baltussen

Erasmus University Rotterdam (EUR); Northern Trust Corporation - Northern Trust Asset Management

Date Written: August 26, 2019


High-risk stocks do not have higher returns than low-risk stocks in all major stock markets. This paper provides a comprehensive overview of this low-risk effect, from the earliest asset pricing studies in the nineteen seventies to the most recent empirical findings and interpretations since. Volatility appears to be the main driver of the anomaly, which is highly persistent over time and across markets, and which cannot be explained by other factors such as value, profitability, or exposure to interest rate changes. From a practical perspective we argue that low-risk investing requires little turnover, that volatilities are more important than correlations, that low-risk indices are suboptimal and vulnerable to overcrowding, and that other factors can be efficiently integrated into a low-risk strategy. Finally, we find little evidence that the low-risk effect is being arbitraged away, as many investors are either neutrally positioned, or even on the other side of the low-risk trade.

Keywords: low risk, low volatility, low beta, minimum variance, anomaly, factor investing, smart beta, low-volatility investing

JEL Classification: G11, G12, G14

Suggested Citation

Blitz, David and van Vliet, Pim and Baltussen, Guido, The Volatility Effect Revisited (August 26, 2019). The Journal of Portfolio Management, 46(2). , Available at SSRN: or

David Blitz (Contact Author)

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA

Pim Van Vliet

Robeco Quantitative Investments ( email )

Rotterdam, 3011 AG

Guido Baltussen

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Northern Trust Corporation - Northern Trust Asset Management ( email )

50 South LaSalle Street
Chicago, IL 60603
United States

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