Work

Low–Risk Alpha without Low Beta

Year: 2024

Type: article

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.

Source: The Journal of Portfolio Management

DOI: 10.3905/jpm.2024.1.657

Authors: David Blitz, Clint Howard, Danny Huang, Maarten Jansen

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W4405834385

FWCI: 0.358

Cites: 20

Cited by: 1

Related to: 10