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Country and Sector Drive Low-Volatility Investing in Global Equity Markets

SSRN Electronic Journal
2013
  • 0
    Citations
  • 3,152
    Usage
  • 1
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    3,152
    • Abstract Views
      3,152
  • Captures
    1
    • Readers
      1
      • SSRN
        1

Article Description

Low-risk stocks have historically outperformed high-risk stocks, delivering better long-term returns with less volatility. This counter-intuitive effect has persisted since 1926, violating one of the basic tenets of Finance Theory. We investigate the role of country and sector effects in low-volatility investing in global equities and find that this strategy has a pronounced “anti-bubble” behavior. As a result, most of the benefit of the low-volatility anomaly can be earned through country and sector selection in lieu of individual stock selection. Additionally, we see that this approach mitigates many of the implementation pitfalls associated with the minimum-volatility stock portfolio. We conclude that sector and country selection is a more practical approach to individual stock selection for capturing the benefits of low-volatility investing in global equities.

Bibliographic Details

Sanne De Boer; Janet Campagna; James H. Norman

Elsevier BV

low-volatility effect; minimum-variance portfolio; global equity investing; asset pricing

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