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Overview of Low-volatility Investing

Posted in Volatility Effects

What are the essential points from the stream of research on low-volatility investing? In their August 2019 paper entitled "The Volatility Effect Revisited", David Blitz, Pim van Vliet and Guido Baltussen provide an overview of the low-volatility (or as they prefer, low-risk) effect, the empirical finding in stock markets worldwide and within other asset classes that higher risk is not rewarded with higher return. Specifically, they review:

  • Empirical evidence for the effect.
  • Whether other factors, such as value, explain the effect.
  • Key considerations in exploiting the effect.
  • Whether the effect is fading due to market adaptation.

Based on findings and interpretations on low-risk investing published since the 1970s, they conclude that:

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