The low volatility effect

The “low volatility effect” is a term used to describe the observation that stocks with lower price volatility historically have generated higher returns than stocks with higher price volatility. Investing approaches that aimed to exploit the low volatility effect gained prominence after the 2008 Global Financial Crisis as market participants sought a less volatile investment experience.

This whitepaper examines the low volatility effect and explores some of the key principles of low volatility investing, demonstrating why an allocation to low volatility strategies could be warranted, and how it should be used in investor portfolios to reduce overall volatility and enhance risk-adjusted returns over the long term.