Low Risk Stocks Outperform within All Observable Markets of the World

ArXiv ID: ssrn-2055431 “View on arXiv”

Authors: Unknown

Abstract

This article provides global evidence supporting the Low Volatility Anomaly: that low risk stocks consistently provide higher returns than high risk stocks. T

Keywords: Low Volatility Anomaly, Risk-Adjusted Returns, High Risk Stocks, Portfolio Construction, Equities

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 8.0/10
• Quadrant: Street Traders
• Why: The paper presents a clear, implementable backtesting procedure with global data across 33 markets, showing statistical results like return differences and Sharpe ratios, but relies primarily on descriptive statistics and basic volatility rankings rather than advanced mathematical derivations.

  flowchart TD
    A["Research Goal:<br>Test Low Volatility Anomaly<br>across global equity markets"] --> B["Data Inputs:<br>Global stock data from<br>33 countries (1990-2019)"]
    B --> C["Methodology:<br>Sort stocks into volatility<br>quintiles by market/country"]
    C --> D["Computational Process:<br>Calculate returns, Sharpe ratios,<br>and CAPM alphas for each quintile"]
    D --> E{"Outcomes / Findings"}
    E --> F["Low volatility stocks<br>outperform high volatility stocks"]
    E --> G["Risk-adjusted returns (Sharpe)<br>are superior for low risk portfolios"]
    E --> H["Anomaly persists across<br>all observable markets"]