TY - JOUR
T1 - A Continuous Return Model for the Low-Volatility and<br/>Low-Beta Anomalies
JF - The Journal of Investing
SP - 107
LP - 120
DO - 10.3905/joi.2017.26.3.107
VL - 26
IS - 3
AU - Agapova, Anna
AU - Ferguson, Robert
AU - Leistikow, Dean
Y1 - 2017/08/31
UR - http://joi.pm-research.com/content/26/3/107.abstract
N2 - This study shows that a “rational,” capital asset pricing model (CAPM) type of positive relationship between short-horizon expected arithmetic return and risk can lead to a negative long-horizon relationship between compound annual return and risk (whether risk is measured by volatility or beta). This result follows from the stochastic portfolio theory relationship that a stock’s growth rate is less than its expected arithmetic return by approximately one-half its variance of return. The negative long-horizon relationships between return mean and volatility/beta often have been noted and characterized as the low-volatility and low-beta anomalies. Thus, these characterizations may be problematic.
ER -