Low Volatility Factor Boosts Investment Returns
Research dating back to 1972 has persistently found that low-volatility (or low beta) stocks have systematically provided higher risk-adjusted returns than high-risk stocks. Today, many leading equity risk model providers (such as MSCI, Axioma, Factset, Bloomberg and Style Analytics) include low volatility as a distinct factor. Despite the strong academic evidence and popularity in the industry, the low-volatility factor is not included in well-known asset pricing models.
Amar Soebhag, Guido Baltussen, and Pim van Vliet, authors of the June 2025 paper “Factoring in the Low Volatility Factor,” examined why low-volatility stocks have historically outperformed their higher-volatility counterparts. This phenomenon challenges traditional…
