Abstract
This article comprehensively examines the performance, investment behavior, and co-movement of minimum-volatility, low-volatility, and low-beta strategies in international markets. First, the authors identify the significant over-weighting of non-cyclical stocks from the consumer staples and utilities sectors, relative to the market, as one of the main, industry-specific return drivers of all ...
Abstract
This article comprehensively examines the performance, investment behavior, and co-movement of minimum-volatility, low-volatility, and low-beta strategies in international markets. First, the authors identify the significant over-weighting of non-cyclical stocks from the consumer staples and utilities sectors, relative to the market, as one of the main, industry-specific return drivers of all low-risk strategies. Second, minimum-volatility, low-volatility, and low-beta strategies produce similarly substantial and statistically significant CAPM and three-factor model alphas in the segments of developed markets and emerging markets over the complete sample period, before and after the recent financial crisis. However, during the crisis, there was no significant outperformance, though low-risk strategies could keep risk down. All low-risk strategies share general commonalities with small-cap and value strategies, except in the European market, where they resemble growth strategies. Third, minimum-volatility, low-volatility, and low-beta strategies generally exhibit large and significant co-movements across and within markets. The authors do not find compelling evidence that one strategy generally dominates another. They conclude that minimum-volatility, low-volatility, and low-beta strategies are equally beneficial for participating in low-risk investing around the world.
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