The Long And Short Of The Low-Volatility Anomaly

As far back as the early 1970s, research has shown that the lowest volatility stocks have provided better returns than the highest volatility stocks. These findings run counter to economic theory, resulting in the low-volatility anomaly. The academic research, combined with the 2008 bear market, has led to low-volatility strategies becoming a darling of investors. For example, as of July 3, 2014, five low-volatility ETFs had reached at least $1 billion in assets under management:

  • PowerShares S&P 500 Low Volatility Portfolio (SPLV): $4.1 billion
  • iShares MSCI USA Minimum Volatility Index Fund (USMV): $2.6 billion
  • iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV): $2.0 billion
  • iShares MSCI All Country World Minimum Volatility Index Fund (ACWV): $1.2 billion
  • iShares MSCI EAFE Minimum Volatility Index Fund (EFAV): $1.2 billion

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