The limits to arbitrage and the low-volatility anomaly
- Autores: Xi Li, Rodney N. Sullivan, Luis Garcia-Feijóo
- Localización: Financial analysts journal, ISSN-e 0015-198X, Vol. 70, Nº. 1, 2014, págs. 52-63
- Idioma: inglés
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- Dialnet Métricas: 1 Cita
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Resumen
The authors found that over 1963-2010, the existence and trading efficacy of the low-volatility stock anomaly were more limited than widely believed. For example, they found no anomalous returns for equal-weighted long-short (low-risk minus high-risk) portfolios and that alpha is largely eliminated when omitting low-priced stocks from value-weighted long-short portfolios. Furthermore, performance of long-short portfolios was significantly reduced by high transaction costs, reflecting the finding that the abnormal returns were concentrated among low-liquidity and smaller stocks. Amplifying liquidity needs, the anomalous excess returns quickly reversed, requiring frequent rebalancing. The authors' findings have meaningful implications for implementing low-risk equity portfolio strategies
