RT Journal Article
SR Electronic
T1 A Tale of Two Low Volatility Indexes
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 95
OP 107
DO 10.3905/jii.2017.8.2.095
VO 8
IS 2
A1 Phillip Brzenk
A1 Aye M. Soe
YR 2017
UL https://pm-research.com/content/8/2/95.abstract
AB Low volatility and minimum volatility indexes have been written about extensively in financial literature, and their index-linked investment vehicles have grown to track a significant amount of assets. While rankings-based and optimized low volatility indexes share a common objective—to deliver higher risk-adjusted returns than the broad market over a long-term investment horizon—their similarity ends there. Using the S&P 500 Low Volatility Index and S&P 500 Minimum Volatility Index, the authors show that there are meaningful differences regarding their risk/return profiles, sector composition, and factor exposures. The differences suggest that market participants should conduct thorough due diligence on sources of returns and evaluate whether active risks taken are compensated or not.TOPICS: Analysis of individual factors/risk premia, exchange-traded funds and applications, volatility measures