Low-Risk Alpha Without Low Beta

Abstract

We propose a risk-managed approach to capturing the low-volatility anomaly. Leveraging multifactor low-risk portfolios to a beta of 1.0 while controlling tracking error amplifies strategy returns and information ratios. Across developed and emerging markets, this levered low-risk strategy outperforms the market and traditional low-risk portfolios. Outperformance is driven by the strategy's low-risk tilt rather than leverage effects. Our results suggest that investors who are able to overcome leverage constraints are able to harvest the low-volatility anomaly more efficiently.

Keywords: Low volatility anomaly, Low volatility investing, Low beta anomaly, Asset pricing, Factor investing, Quant investing