RT Journal Article
SR Electronic
T1 Macro Risk of Low-Volatility Portfolios
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP jpm.2022.1.434
DO 10.3905/jpm.2022.1.434
A1 David Blitz
YR 2022
UL https://pm-research.com/content/early/2022/11/14/jpm.2022.1.434.abstract
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.