Skip to main content
main-content
Top

Hint

Swipe to navigate through the chapters of this book

2017 | OriginalPaper | Chapter

5. The Low-Volatility Anomaly

Author: James Ming Chen

Published in: Econophysics and Capital Asset Pricing

Publisher: Springer International Publishing

share
SHARE

Abstract

A direct relationship between risk and return—in the sense that return should vary positively and proportionately to volatility—is so essential that this should be designated as the first law of finance. Investors otherwise would never be induced to commit capital to risky assets. In reality, low-volatility stocks offer abnormally high returns relative to their riskier counterparts. By undermining conventional assumptions about the relationship between risk and return, the low-volatility anomaly arguably represents the most significant challenge to mathematical finance. The value premium in the Fama and French’s three-factor model is arguably a special case of the low-volatility premium, attributable to the costly reversibility of physical investments and human capital during recessions and economic downturns. The literature of strategic management has identified a similar effect, called Bowman’s paradox. That discipline identifies managerial culture, especially corporate and social responsibility, as a possible explanation for abnormal returns on low-volatility stocks.

To get access to this content you need the following product:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 69.000 Bücher
  • über 500 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Testen Sie jetzt 15 Tage kostenlos.

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 58.000 Bücher
  • über 300 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Testen Sie jetzt 15 Tage kostenlos.

Metadata
Title
The Low-Volatility Anomaly
Author
James Ming Chen
Copyright Year
2017
DOI
https://doi.org/10.1007/978-3-319-63465-4_5

Premium Partner