Economy & PolicyCore researchInactiveNew

Low Volatility Anomaly

Updated dailyData needs: lowlong onlyshort onlylong short

2011

Baker, M., Bradley, B., Wurgler, J. (2011). "Benchmarks as Limits to Arbitrage." Financial Analysts Journal, 67(1), 40-54.

Read the paper →

In plain terms

The older rule stays blocked because it compares each stock with its own history instead of ranking monthly stock peers.

How it works

Low-vol stocks earn higher risk-adjusted returns; benchmark-relative institutional incentives are the channel.

Live results

21 times picked on its own · 45 times inside a blend (37 beat the stock) · updated 2026-07-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 45 such blended picks (37 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

Data dependencies

Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Tested over: 1968-2008

See the source research for the original effect size; a modern replication on new data may be weaker.

Example tickers where this is likely to fire

KO PG JNJ PEP MCD

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

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Compare a stock’s multi-year monthly volatility with other stocks in that month’s universe, then test trading the lowest-risk or highest-risk tail.

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Low-beta stocks (calmer than the market) tend to deliver better risk-adjusted returns than high-beta ones; this family overweights when beta drops.

Speculative-Beta FadeEconomy & Policy

The older proxy implementation stays blocked; its replacement tests beta-window stability using observed paired returns.

Low-Volatility PremiumEconomy & Policy

Counterintuitive: high-idiosyncratic-vol stocks UNDERPERFORM. So short the high-IVOL names, long the steady ones.

Explore Low Volatility Anomaly on alphactor.ai

See which tickers this family is currently firing on, with live signals and rankings.

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