The Low-Risk Effect, from Betting Against Beta to Betting Against Correlation
A 2021 paper by Pasetti and Montagna on the low-volatility anomaly in equities, on a 2003–2021 sample: the abstract mentions a Sharpe ratio and profits and leaves out a benchmark, an out-of-sample test, transaction costs, multiple testing and the size of the universe.
“Starting form the “father” of Modern Portfolio Theory, passing through Sharpe’s CAPM and Black 1972, we analyzed in deep the so-called "Low Risk Effect" and the debate between leverage constraints and behavioural theories.”
AssetEquities
StrategyLow-volatility anomalyprediction markets
Sample window2003–2021
ClaimSharpe ratioprofit
Also stated: Long-short
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
Institutional-grade audit of this strategy.
£5 — Request the audit- Audit of the paper claims accounting for costs, luck, crises, originality, geography, etc.
- Reproduction code integratable into Bloomberg, IBKR, etc.
- Bias-free datasets for backtesting included
- Delivered in 2 working days
The paper's neighbourhoodLow-volatility anomaly by year
FamilyLow-volatility anomaly25Momentum and trend following289Factor investing240Machine learning return prediction15318 more · 977
AssetEquities21
The family is counted across the whole universe. Asset, method and authors are counted inside the family.
| Similar papers | citation | same method | same asset | same authors | |
|---|---|---|---|---|---|
| Correlation-Gated Risk Budgeting for Equity Factor Portfolios by Guo | 2026 | ||||
| The Economic Value of Sample Correlation Information in Minimum-Variance Portfolios by Liu and Liu | 2026 | ||||
| Integrating Geopolitical Risk Into Low Volatility Factor Construction by Kallali et al. | 2026 | ||||
| Revisiting the Idiosyncratic Volatility Puzzle in China: Evidence from Deep Learning Models by Wu et al. | 2026 | ||||
| From the White House to Wall Street: How U.S. Political Regimes and Policy Uncertainty Shape the Low-Risk Anomaly by Velinova | 2025 |