Volatility-managed portfolios in the international markets

Detta är en Master-uppsats från Stockholms universitet/Finansiering

Sammanfattning: Volatility-managed portfolios offer mixed returns in an international setting based on ex-ante information. The results of this paper further strengthen the theory that the variability of excess returns from volatility-management are more dependent on underlying investor strategy rather than differences of global markets. We find that momentum strategies, as measured by the winners-minus-losers, are universally (except Japan) benefitted from volatility-management with an excess return between 6.96% and 14.28% annually across different regions/cross-sections garnered by the managed portfolio controlled against the Fama and French (2015) five-factor model. Value and profitability factors show mixed results with the beneficial performance in about half of the examined regions respectively. We prove that these relationships are robust through periods of market-wide crashes (Dotcom-bubble and financial crises of 2007/2008), tighter leverage constraints (≤1, ≤1.5) show however that the excess returns are dampened, concluding that access to leverage is a fundamental aspect of employing volatility-management to most portfolios. The results of this research paper expand previous literature of volatility-management by broadening the strategy to global markets.

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