http://turnkeyanalyst.com/2013/08/intelligent-thoughts-on-low-vol-investing/
http://falkenblog.blogspot.tw/2013/08/is-low-vol-anomaly-really-skew-effect.html
http://falkenblog.blogspot.tw/2013/08/now-not-time-to-value-tilt-low-vol.html
Strategy Summary:
- Outlines methodolgy to construct low-volatility portfolio
- This low volatility portfolio has higher CAGR, lower volatility, and higher Sharpe ratio compared to Cap-Weighted benchmark.
- However, there are numerous downfalls for the low volatility strategy. They include:
- Large tracking error relative to the benchmark (around 9-10% in the U.S.).
- Overweighting specific sectors compared to the benchmark. Low volatility portfolios have exposures to around 4.75 sectors in the U.S., as opposed to 9.59 sectors for the benchmark.
- Higher turnover (from 19-45% for low volatility strategies in U.S. compared to 4.42% for benchmark).
- Low volatility strategies trade less liquid stocks (comparing Bid-Ask spread in table 6).
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