Robeco - Beauty and the beast of low-volatility investing

We usually focus on how to design the best low-volatility strategy, but in this note we set out to construct a very bad low-volatility strategy. Comparing good and bad low-volatility strategies we find a large and significant return difference of 6% per annum. Clearly, not all low volatility stocks are created equal. Our results highlight the importance of being selective when investing in low-volatility stocks.