Do low volatility stocks outperform?

New research suggests that low-volatility stocks may outperform their more volatile counterparts.

What is a low volatility portfolio?

Low-volatility investing is an investment style that buys stocks or securities with low volatility and avoids those with high volatility. This investment style is also referred to as minimum volatility, minimum variance, managed volatility, smart beta, defensive and conservative investing.

Is low volatility a factor?

The low volatility factor provides a mechanism for investors to control risk while generating similar, if not superior, investment returns relative to the market over the long run. The low volatility factor can be captured through factor-based indices, such as smart beta and risk premia strategies.

What are some low volatility stocks?

Performance Data

• Aflac Inc. (AFL), +892\%, -8.5\%
• Amdocs Ltd. (DOX), +355\%, -8.5\%
• BCE Inc. (BCE), +306\%, -5.7\%
• Berkshire Hathaway Inc. Class B (BRK. B), +356\%, -11.9\%
• Coca-Cola Co. (KO), +234\%, -11.2\%
• Honeywell International Inc. (HON), +740\%, -11.5\%
• Loews Corp. (L), +197\%, -13.9\%
• PepsiCo Inc. (PEP), +213\%, -9.5\%

Why volatility is bad for a portfolio?

First, volatility creates fear and uncertainty, which can lead to bad investment decisions. Volatility can also make investors fearful about investing more money in the market, meaning they miss out on good trading days and the benefits of long-term compounding. Volatility also eats into your returns long term.

What does low volatility mean chemistry?

In chemistry, volatility is a material quality which describes how readily a substance vapourizes. At a given temperature and pressure, a substance with high volatility is more likely to exist as a vapour, while a substance with low volatility is more likely to be a liquid or solid.

How do you trade low stock volatility?

Select high quality value stocks or invest in a mutual fund or exchange traded fund (ETF) that emphasizes low volatility stocks. Value investing consists of avoiding three types of risk: company, valuation and earnings risks.

Do high beta stocks outperform?

High beta stocks are those that are positively correlated with returns of the S&P 500, but at an amplified magnitude. Because of this amplification, these stocks tend to outperform in bull markets, but can greatly underperform in bear markets.