Tag Archives: low volatility

Low Volatility Rate Response – Down-Market Analysis

In the second blog of this series, we saw that the S&P 500® Low Volatility Rate Response generally achieved similar levels of volatility reduction as the S&P 500 Low Volatility Index. In our paper Inside Low Volatility Indices (published in 2016), the low volatility index historically outperformed the S&P 500 during severe market downturns (Exhibit Read more […]

Low Volatility Rate Response – Interest Rate Changes and Relative Performance

In a prior post, we saw that during sharp rising interest rate periods, the S&P 500® Low Volatility Rate Response fared better than the S&P 500 Low Volatility Index, even though both indices generally underperformed the S&P 500. In this post, we examine if there is a relationship between the magnitude of interest rate changes Read more […]

Maintaining Risk Reduction While Reducing Interest Rate Risk

Previously, we highlighted that the S&P 500® Low Volatility Rate Response Index fared better than the S&P 500 Low Volatility Index when interest rates increased. The objective of low volatility portfolios is to deliver lower portfolio volatility than the broad market benchmark, leading to higher risk-adjusted returns over a long-term investment horizon. In this blog, Read more […]

Reducing Interest Rate Risk in a Low Volatility Strategy

In prior posts, we reviewed the impact of rising interest rates on the S&P 500® Low Volatility Index returns. We showed that the low volatility index had negative exposure to rising interest rates, and thus has historically underperformed the S&P 500 in periods when interest rates rose significantly. In this post, we look at the Read more […]

Sector Volatility Conveys Most (But Not All) of the Story in the Latest S&P 500 Low Volatility Index Rebalance

In January 2018, realized volatility (rolling 252-day) for the S&P 500 reached a 27-year low. Since then, volatility has been steadily creeping up and as of April 30, 2018, it sat at 12.1%—almost double the levels in January. Despite having increased significantly, volatility is still well below the historical average of 16%. Rolling 252-Day Volatility Read more […]

Interest Rate Risk of Low Volatility Indices – Part II

In a previous blog, we performed preliminary exploration of rising interest rate exposure of the S&P 500® Low Volatility Index. In this blog, we continue the analysis to see if there is a relationship between the magnitude of interest rate change and magnitude of active return of the low volatility index relative to the S&P Read more […]

Interest Rate Risk of Low Volatility Indices

A topic commonly brought up when interest rates rise is the impact that rates have on the performance of low volatility indices. Several studies[1][2] have shown that low volatility portfolios have exposure to rising interest rate risk. One of the main drivers of this exposure stems from the bond-like characteristics of sectors usually favored by Read more […]

Low Volatility and Market Regime Shifts: Lessons From the First Quarter

Since antiquity, people have measured time in months. Unsurprisingly, investors tend to evaluate performance in monthly increments. This can be troublesome, as we will see in the case of low volatility, particularly during market regime changes. Low volatility strategies are designed to provide investors with protection in falling markets and participation in rising markets. Disappointments Read more […]

Performance Analysis of the S&P High Yield Low Volatility Corporate Bond Index for 2017

The S&P U.S. High Yield Low Volatility Corporate Bond Index (the HYLV index) was launched on Dec. 20, 2016, with the aim of capturing high yield bonds with less credit risk and lower return volatility than the broad investment universe of U.S. high yield bonds. One year after the index launch date, we present a Read more […]

Low Volatility Effect in the U.S. Preferred Stock Market

The low volatility effect in equities refers to the findings that stocks that previously exhibited lower realized volatility outperform those with higher volatility as well as the broad based market on a risk-adjusted basis. It has been well documented in academic and practitioner research, and we have also seen widespread adoption in investment product offerings Read more […]