The success of of the low volatility factor can be challenging to explain. Investing theory teaches us that to get an additional return, we need to take additional risk and if we reduce risk, our return should come down with it. But low volatility seems to defy that rule. In this episode, we look at the low volatility factor, how it is defined, and why it works. We also look at how the returns of low volatility can be enhanced by combining it with other factors, and take an in depth look at our Multi-Factor Investor strategy on Validea, which is based on the paper The Conservative Formula by Pim van Vliet, and how it puts that idea into action.
We hope you enjoy the discussion.
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