@article {De Franco53, author = {Carmine De Franco and Bruno Monnier and Ksenya Rulik}, title = {Interest Rate Exposure of Volatility Portfolios}, volume = {8}, number = {2}, pages = {53--67}, year = {2017}, doi = {10.3905/jii.2017.8.2.053}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The authors assess the exposure of stock portfolios sorted by total volatility to interest rate risk and determine whether this nonequity risk can explain differences in risk and risk-adjusted returns between low- and high-volatility portfolios over a 25-year period for U.S. equities. They find that the addition of an interest rate risk factor to the four-factor model reveals a small but positive duration for low-volatility portfolios. However, this new factor fails to improve the explanatory power of the model for both low- and high-volatility portfolios and has no significant impact on the portfolios{\textquoteright} risk-adjusted return. The authors find that interest rate factor loadings are fairly robust across different specifications of the multifactor model for low-volatility portfolios but are unstable for high-volatility portfolios. For all volatility portfolios under study, the significance of the results is highly dependent on the choice of time period.TOPICS: Analysis of individual factors/risk premia, equity portfolio management, volatility measures}, issn = {2154-7238}, URL = {https://jii.pm-research.com/content/8/2/53}, eprint = {https://jii.pm-research.com/content/8/2/53.full.pdf}, journal = {The Journal of Beta Investment Strategies} }