Art der Publikation: Arbeitspapier

On the performance of volatility-managed equity factors - international and further evidence

Autor(en):

Schwarz, Patrick

Veröffentlichung:

2021

Schlagworte:

Volatility-managed portfolio; Transaction costs; Factor timing; Culture; International stock markets

Ergänzende Unterlagen:

Online Appendix

Link zum Volltext:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3951115

Vortrag zu dieser Publikation:

28th Annual Meeting of the German Finance Association (DGF)

Zitation:

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Kurzfassung

Abstract

Motivated by the mixed evidence on the performance of (downside) volatility-managed equity factor portfolios in the U.S., I study the performance of nine (downside) volatility-managed equity factors before and after considering transaction costs in a set of 45 international equity markets. My results suggest that volatility management is most promising for market, value, profitability, and momentum portfolios and that the performance can be enhanced by applying downside volatility instead of total volatility (variance) as a scaling factor. Nevertheless, a marginal trader would find it difficult to profit from these strategies as only the managed market and momentum strategies are partially robust to my transaction cost estimations. Collectively, my results suggest that the persistence of abnormal returns of (downside) volatility-managed equity factors can largely be explained by the associated transaction costs. Finally, my cross-country analysis suggests that the slow trading hypothesis is partially able to explain cross-country performance differences of volatility-managed value and momentum portfolios.