Do low beta stocks/funds have any alpha?

[Saltynuts]

It looks like they had alpha until last year.
https://www.robeco.com/media/3/1/1/...-investing-lost-its-mojo-us_tcm1010-27998.pdf
Has low volatility investing lost its mojo?
View attachment 252060

Here is one that says alpha is not a goal.
https://institutional.vanguard.com/web/c1/investments/product-details/fund/4419
U.S. Minimum Volatility ETF

Thanks ph1l! So, would that chart not indicate that its a good time to get back into low beta stocks for when they recover their mojo?

 

[Saltynuts]

AQR wrote a paper on it

Neat! Any idea how can I get ahold of said paper?

 

[ph1l]

Thanks ph1l! So, would that chart not indicate that its a good time to get back into low beta stocks for when they recover their mojo?

The chart shows "Past Performance Is Not Indicative Of Future Results."

 

[ph1l]

Neat! Any idea how can I get ahold of said paper?

https://images.aqr.com/-/media/AQR/...and-Momentum-on-Low-Volatility-Portfolios.pdf

Research showing that the lowest-risk stocks tend to outperform the highest-risk stocks over time has led to rapid
growth in so-called low-risk equity investing in recent years. The authors examined the performance of both the
low-risk strategy previously considered in the literature and a beta-neutral low-risk strategy that is more relevant in
practice. They found that the historical performance of low-risk investing, like that of any quantitative investment
strategy, is time varying. They also found that both low-risk strategies exhibit dynamic exposure to the well-known
value, size, and momentum factors and appear to be influenced by the overall economic environment. Their results
suggest that time variation in the performance of low-risk strategies is probably influenced by the approach to
constructing the low-risk portfolio strategy and by the market environment and associated valuation premiums.

 

[Saltynuts]

You are the man ph1l, thanks so much! Need to read completely, but based just on what you quoted, seems if you could come up with an easy way to measure low-risk versus high-risk stock performance, on a beta basis, when one went way up versus the other you could buy the other, and vice versa, for excess profits. Just a little alpha for ya it seems!!!

 

[Spaghetti Code]

I think I remember reading some time ago that low beta stocks/funds actually tend to perform better on a risk adjusted basis than other stocks/funds. Their rationale for this phenomenon was that people want to get the most possible upside, but don't like to leverage, so they tend to buy riskier assets that give them more upside potential. But this pushes returns of those risker assets down vis-a-vis low beta stocks/funds. So the idea would be that you could buy more lower-beta funds/stock on leverage and get the same upside potential, but less downside potential. I think lol.

Yeah, I remember this too, but I can't find it easily in my text book. As I recall, they tried grouping portfolios into cohorts of beta, and compared the results of each portfolio at the end. I don't remember low beta stocks doing better, but the high beta stocks definitely did worse.