RT Journal Article
SR Electronic
T1 U.S. Low and Minimum Volatility Indexes: <em>An Empirical</em><br/><em>Analysis of Factor Exposure</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 39
OP 52
DO 10.3905/jii.2017.8.2.039
VO 8
IS 2
A1 Dana M. D’Auria
A1 John B. McDermott
YR 2017
UL https://pm-research.com/content/8/2/39.abstract
AB This study investigates the major low and minimum volatility indexes used as benchmarks for the largest ETFs in the space. The authors contend that the findings on low and minimum volatility investing in the academic literature are captured by the indexes. Specifically, they find that the indexes examined provide superior risk-adjusted performance relative to a market capitalization benchmark. They also find that factor exposures are significant, on average, and explain away the significant alphas in the large-/mid-cap but not small-cap indexes examined. Further, they find that factor exposures, particularly value and momentum, are time-varying and can be of either sign, whereas investment and profitability exposure are generally positive and consistent. Smart-beta and factor investors should be aware of the nature of the factor exposures that low and minimum volatility strategies contribute to a portfolio.TOPICS: Exchange-traded funds and applications, analysis of individual factors/risk premia, volatility measures