// STUDY RESULT · 1990-01 TO 2026-07
Low-Volatility Anomaly
TRADE-OFFLow-volatility and low-beta US stocks have earned similar or higher returns than high-volatility stocks with much less risk, the opposite of what the CAPM predicts.
| THE STRATEGY | $SPX BUY & HOLD | |
|---|---|---|
| Growth a year (CAGR) | 7.6% | 9.0% |
| Return per unit of risk (Sharpe) | 0.74 | 0.66 |
| Worst fall (max drawdown) | -36.3% | -52.6% |
// GROWTH OF $1, LOG SCALE
AMBER: THE STRATEGY · GREY: $SPX BUY & HOLD
Tested on years it never saw (from the split): 7.1% a year against 12.4% for the benchmark; Sharpe 0.79 in the training years, 0.65 after.
After 25 bps of trading costs: 4.7% a year. EDGE OVER RANDOM
// DECADE BY DECADE
| ERA | STRATEGY | BENCHMARK |
|---|---|---|
| 1990s | 7.3% | 15.5% |
| 2000s | 5.1% | -2.6% |
| 2010s | 11.5% | 11.6% |
| 2020s | 5.8% | 14.1% |
// THE IDEA, AS PUBLISHED
Haugen & Baker (1991); Baker, Bradley & Wurgler (2011) · 1991
- Rank large US stocks by trailing volatility (BBW: 5 years of monthly returns) or by beta
- Hold the lowest-volatility quintile; the highest quintile is the comparison leg
- Haugen and Baker instead optimize a long-only minimum-variance portfolio
- Sector neutralization is our option, not part of either source
A real computation on the QuantGPT warehouse, survivorship-free, walk-forward. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-09-24 19:42 ON THE QUANTGPT WAREHOUSE: EVERY DELISTED NAME KEPT, FUNDAMENTALS AS FILED. NOT INVESTMENT ADVICE.