| Name: | Description: | Size: | Format: | |
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| 1.67 MB | Adobe PDF |
Advisor(s)
Abstract(s)
According to the methodology in Ang et al. (2009), we find that monthly stock excess
returns are negatively related to the one-month lagged firm idiosyncratic volatility, across
the U.S. with data spanning from June 1962 to December 2012. We show that the Low
Volatility Anomaly disappears after controlling for price momentum for the overall
market, which leads us to perform a deeper analysis. We segment the market by industry
and find that, across 49 industries, the Food Products sector is the only one evidencing
higher returns on low volatility stocks, even after controlling for market returns, size,
value, long- and short-term momentum. An investment strategy that goes long on the low
volatility portfolio and short on the high volatility portfolio within this sector is highly
profitable, outperforming largely both the S&P500 and the DJIA indexes in 14% per
annum, on average.