Finance Commons^™

Examining The Low Volatility Anomaly In Stock Prices, Munish Malhotra

Electronic Theses and Dissertations

Modern portfolio theory states that investments with greater beta, a common measure of risk, require greater returns from investors in order to compensate them for taking greater risk. Therefore, under the premise that market participants act rationally and therefore markets run efficiently, investments with higher beta should generate higher returns vis-à-vis investments with lower beta over the long run. In fact, many studies suggest that investments with lower beta actually generate equal to or higher returns relative to investments with higher beta. In looking at data for the S&P 500 going back 22 years between 1990 and 2012, this study …