PT  - JOURNAL ARTICLE
AU  - David Blitz
TI  - Macro Risk of Low-Volatility Portfolios
AID  - 10.3905/jpm.2022.1.434
DP  - 2022 Nov 14
TA  - The Journal of Portfolio Management
PG  - jpm.2022.1.434
4099  - https://pm-research.com/content/early/2022/11/14/jpm.2022.1.434.short
4100  - https://pm-research.com/content/early/2022/11/14/jpm.2022.1.434.full
AB  - This article examines the exposures of low-volatility portfolios to various sources of systematic risk. Our analysis includes interest rate, implied volatility, liquidity, commodity, sentiment, macroeconomic, and climate risk factors. We find that low-volatility portfolios lower the exposure to all significant drivers of systematic risk. The risk reductions vary from a minimum of 20% to over 90% across the various risk factors. Although low-volatility portfolios are very effective at dampening known structural risk factors, the 2020 COVID-19 pandemic episode illustrates that event risk is harder to control for data-driven methods.