RT Journal Article
SR Electronic
T1 Low-Volatility Portfolio Construction: <em>Ranking Versus Optimization</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 63
OP 73
DO 10.3905/jii.2012.3.3.063
VO 3
IS 3
A1 Aye M. Soe
YR 2012
UL https://pm-research.com/content/3/3/63.abstract
AB We analyze the low-volatility effect in the U.S. equity market with a focus on the common properties of various low-volatility strategies. Drawing from the extensive academic literature that exists on the topic, we examine the two major approaches to constructing low-volatility portfolios and apply them to the U.S. equity market: mean variance optimization–based and rankings-based approaches. Our analysis shows that both approaches are equally effective in reducing portfolio volatility over a long-term investment horizon. We then extend our analysis to the international and emerging markets. Our findings confirm that the low-volatility effect is not unique to the U.S. equity markets; it is present on a global scale.TOPICS: Portfolio construction, equity portfolio management, emerging