post list
QuantDare
categories
asset management

“Past performance is no guarantee of future results”, but helps a bit

ogonzalez

asset management

Playing with Prophet on Financial Time Series (Again)

rcobo

asset management

Shift or Stick? Should we really ‘sell in May’?

jsanchezalmaraz

asset management

What to expect when you are the SPX

mrivera

asset management

K-Means in investment solutions: fact or fiction

T. Fuertes

asset management

How to… use bootstrapping in Portfolio Management

psanchezcri

asset management

Playing with Prophet on Financial Time Series

rcobo

asset management

Dual Momentum Analysis

J. González

asset management

Random forest: many is better than one

xristica

asset management

Using Multidimensional Scaling on financial time series

rcobo

asset management

Comparing ETF Sector Exposure Using Chord Diagrams

rcobo

asset management

Euro Stoxx Strategy with Machine Learning

fjrodriguez2

asset management

Hierarchical clustering, using it to invest

T. Fuertes

asset management

Lasso applied in Portfolio Management

psanchezcri

asset management

Markov Switching Regimes say… bear or bullish?

mplanaslasa

asset management

Exploring Extreme Asset Returns

rcobo

asset management

Playing around with future contracts

J. González

asset management

BETA: Upside Downside

j3

asset management

Approach to Dividend Adjustment Factor Calculation

J. González

asset management

Predict returns using historical patterns

fjrodriguez2

asset management

Dream team: Combining classifiers

xristica

asset management

Stock classification with ISOMAP

j3

asset management

Could the Stochastic Oscillator be a good way to earn money?

T. Fuertes

asset management

Correlation and Cointegration

j3

asset management

Momentum premium factor (II): Dual momentum

J. González

asset management

Dynamic Markowitz Efficient Frontier

plopezcasado

asset management

‘Sell in May and go away’…

jsanchezalmaraz

asset management

S&P 500 y Relative Strength Index II

Tech

asset management

Performance and correlated assets

T. Fuertes

asset management

Reproducing the S&P500 by clustering

fuzzyperson

asset management

Size Effect Anomaly

T. Fuertes

asset management

Predicting Gold using Currencies

libesa

asset management

Inverse ETFs versus short selling: a misleading equivalence

J. González

asset management

S&P 500 y Relative Strength Index

Tech

asset management

Seasonality systems

J. González

asset management

Una aproximación Risk Parity

mplanaslasa

asset management

Using Decomposition to Improve Time Series Prediction

libesa

asset management

Las cadenas de Markov

j3

asset management

Momentum premium factor sobre S&P 500

J. González

asset management

Fractales y series financieras II

Tech

asset management

El gestor vago o inteligente…

jsanchezalmaraz

asset management

¿Por qué usar rendimientos logarítmicos?

jsanchezalmaraz

asset management

Fuzzy Logic

fuzzyperson

asset management

El filtro de Kalman

mplanaslasa

asset management

Fractales y series financieras

Tech

asset management

Volatility of volatility. A new premium factor?

J. González

asset management

Are Low-Volatility Stocks Expensive?

jsanchezalmaraz

18/02/2016

No Comments
Are Low-Volatility Stocks Expensive?

The world of finance is no stranger to fashion, and Low volatility equity investing has recently attracted serious interest from the investment community. Its popularity has led to doubts regarding the valuation level for this overcrowded arena.

Just look at the current market caps of the most representative ETFs of the low volatility anomaly. If we highlighted the best known, in 2011 they began its launch with about 5 million under management, and currently standing at exorbitant amounts. To get an idea, during its first two years SPLV achieved a daily average inflow of 7.6 million! For its part, in the last year USMV and EFAV have gotten about 4 billion.

ETFs

These good results ratify the increased investment in low volatility strategies. Papers abound for explanations about its viability in all universes, trying combinations with other premium factors, or delving into the anomaly through the operating performance. But there may also be collateral damage.

Have low volatility stocks really deteriorated in its fundamental valuation?

According to Pim van Vliet, portfolio manager of Robeco Conservative Equities, a generic low-volatility strategy is getting more expensive because there’s high demand due to uncertainty in markets.

We take the universe of S&P 500 in January of 2010 and 2016, and we calculated the ratios of most representative fundamentals value such as the P/B, P/E and TEV/EBITDA. By analysing the behavior of the low volatility stocks relative to the components of the index, we see that in all cases the median has risen considerably. This confirms that the anomaly is more expensive than a few years ago.

Low value

Under these circumstances, it is clear that the low volatility has been penalised. So, when creating a portfolio it’s important to make an enhanced selection and to take care with what you buy. After all, not all stocks with low volatility are equal, and returns can be significantly different.

Tweet about this on TwitterShare on LinkedInShare on FacebookShare on Google+Email this to someone

add a comment

wpDiscuz