// STUDY RESULT · 1998-01 TO 2026-09

Low-Volatility Anomaly

TRADE-OFF

Low-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.

How this run differs from the source: 20 names, equal weight, on one year of daily volatility; the papers sort quintiles on up to five years of monthly returns.

	THE STRATEGY	$SPXTR BUY & HOLD
CAGR	7.6%	9.3%
Sharpe ratio	0.70	0.66
Max drawdown	-32.1%	-50.9%

// GROWTH OF $1, LOG SCALE

AMBER: THE STRATEGY · GREY: $SPXTR BUY & HOLD

Out-of-sample (from the split): CAGR 4.9% against 14.0% for the benchmark; Sharpe 1.06 in-sample, 0.41 out-of-sample.

After 25 bps of trading costs: 6.4% a year. EDGE OVER RANDOM

// DECADE BY DECADE

ERA	STRATEGY	BENCHMARK
1990s	-2.7%	20.9%
2000s	11.9%	-0.8%
2010s	9.2%	14.0%
2020s	2.1%	15.2%

// YEAR BY YEAR, LOSING YEARS IN RED

1998*1.3%27.2%

1999-9.1%21.0%

200041.7%-9.1%

200110.8%-11.9%

20022.2%-22.1%

200332.7%28.7%

200415.0%10.9%

20058.8%4.9%

200622.5%15.8%

20072.9%5.5%

2008-17.6%-37.0%

200916.3%26.5%

20109.5%15.1%

201115.0%2.1%

20126.8%16.0%

20139.6%32.4%

20148.8%13.7%

2015-0.6%1.4%

201611.9%12.0%

20177.4%21.8%

20185.9%-4.4%

201915.4%31.5%

20202.3%18.4%

2021-4.7%28.7%

2022-4.2%-18.1%

2023-7.7%26.3%

20249.1%25.0%

20259.6%17.9%

2026*13.6%11.8%

Losing years: 1999 (-9.1%), 2008 (-17.6%), 2015 (-0.6%), 2021 (-4.7%), 2022 (-4.2%), 2023 (-7.7%). Each cell: the strategy, then the benchmark below it. * a part year.

// 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

RUN IT YOURSELF ▸ IN THE LIBRARY

A real computation on the QuantGPT warehouse, walk-forward. A study across the whole market includes only part of the companies that later delisted from 1998 (survivors only before); a study on your own list of tickers is not affected. Gross returns, no costs except where stated. Past performance is not a promise. Findings, not advice. COMPUTED 2026-11-07 08:41 ON THE QUANTGPT WAREHOUSE. COMPANIES THAT LATER DELISTED ARE ONLY PARTLY IN THIS UNIVERSE (A FIX IS IN PROGRESS), SO THE RESULT LEANS TOWARD SURVIVORS. FUNDAMENTALS BY FILING DATE. NOT INVESTMENT ADVICE. PRIVACY