The Low-volatility Anomaly and the Adaptive Multi-Factor Model

Robert Jarrow (), Rinald Murataj, Martin T. Wells and Liao Zhu

Papers from arXiv.org

Abstract: The paper provides a new explanation of the low-volatility anomaly. We use the Adaptive Multi-Factor (AMF) model estimated by the Groupwise Interpretable Basis Selection (GIBS) algorithm to find those basis assets significantly related to low and high volatility portfolios. These two portfolios load on very different factors, indicating that volatility is not an independent risk, but that it's related to existing risk factors. The out-performance of the low-volatility portfolio is due to the (equilibrium) performance of these loaded risk factors. The AMF model outperforms the Fama-French 5-factor model both in-sample and out-of-sample.

Date: 2020-03, Revised 2021-04
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://arxiv.org/pdf/2003.08302 Latest version (application/pdf)

Related works:
Journal Article: THE LOW-VOLATILITY ANOMALY AND THE ADAPTIVE MULTI-FACTOR MODEL (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2003.08302

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().