Tag Archives: low volatility

Worth Every Penny

This morning’s Wall Street Journal reports that “Investors are piling into the shares of small, risky companies at the fastest clip on record, in search of investments that promise a chance of outsize returns….”  We’ve commented on such risk-seeking behavior earlier, because it has an important bearing on the low volatility anomaly. The tendency for low-volatility or Read more […]

A Review of the S&P Global Intrinsic Value Index

The recently published research paper on S&P GIVI®: Factor Investing: A Review of the S&P Global Intrinsic Value Index analyzes in detail the source of GIVI returns globally and regionally. S&P GIVI is a multi-factor global index which provides exposure to low volatility and the value factors by removing 30% of the highest beta stocks Read more […]

How Much Popularity Can Low Volatility Stand?

The low volatility anomaly — i.e., the tendency for low-volatility or low-beta portfolios to outperform market averages — has been the subject of at least 40 years of academic research.  Given its challenge to what “everyone knows” about risk and return, it’s a fertile field for both professors and practitioners, some of whom recently characterized Read more […]

A Simple Hedge Strategy

Alternative investments for high net worth investors are like the weather — everyone talks about it, but no one does anything about it.  In fairness, alternative investments — hedge funds, private equity, and the like — are often hard to access and complicated to explain.  But if they can deliver on their promise of uncorrelated Read more […]

Passive Risk Management

In major cities at this time of year, an army of street vendors bristling with umbrellas await their chance to emerge in entrepreneurial fervour, providing tourists and commuters alike with immediate respite from unanticipated rain. It’s a viable business strategy: the chaotic nature of weather means that occasional rainfall remains practically impossible to predict*, hence Read more […]

Beta, Smart and Dumb

The idea of “smart beta” is gaining increased acceptance, although not without some controversy.  I have to confess that I really dislike the term “smart beta,” and not just because I didn’t invent it.  “Alternative beta” I can live with, or “factor” indices, or “strategy” indices — but “smart” beta leaves me cold. Which is Read more […]

That Was Easy

If every month were like July, equity investors would have an easy life.  The most striking thing about July’s U.S. equity market performance was how consistently good it turned out to be.  The S&P 500 was up +5.09%, with the Mid Cap 400 ahead of that pace (+6.20%) and the Small Cap 600 further ahead Read more […]

Volatility: Love It or Leave It

Investors are rightly concerned about the future course of equity prices, especially in the context of the Federal Reserve’s bruited tapering of QE3, and it’s obviously true that equity market volatility has increased sharply since the beginning of May. Rising volatility typically means lower stock prices — the correlation of the S&P 500 and the Read more […]

Low Volatility: Success or Failure?

One of the consequences of May’s shift in leadership of the U.S. equity market from defensive to cyclical sectors has been the underperformance of most (if not all) low volatility strategies. Does this mean, as some commentators have suggested (e.g. see http://www.indexuniverse.com/hot-topics/18860-when-low-volatilitty-bites-back.html?showall=&fullart=1&start=4), that low volatility strategies “failed?” Making a judgment of success or failure, about Read more […]

Low Volatility: Active or Passive?

A recent posting suggested that institutional investors interested in exploiting the low volatility anomaly should do so by using active managers rather than one of the several passive vehicles available.  Far be it from me to criticize anyone for talking his own book, since I’m about to do it – but this is reminiscent of Read more […]