The Low-Risk Anomaly: A Decomposition into Micro and Macro Effects

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Financial Analysts Journal
March/April 2014 | Vol. 70 | No. 2 | 16 pages
Source: CFA Institute
Malcolm Baker Brendan Bradley Ryan Taliaferro

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Low-risk stocks have offered a combination of relatively low risk and high returns. We decomposed the low-risk anomaly into micro and macro components. The micro component comes from the selection of low-beta stocks. The macro component comes from the selection of low-beta countries or industries. Both parts contribute to the anomaly, with important implications for the construction of managed-volatility portfolios.

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  • Equity Investments:
    • Equity Market Valuation and Return Analysis
    • ·
    • Fundamental Analysis (Sector, Industry, Company) and the Valuation of Individual Equity Securities
  • Portfolio Management:
    • Equity Portfolio Management Strategies
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