Low-Beta Stock Peformance Outshines High-Beta Cousins Over 5, 10, And 20-Year Periods Based Both On Academic Research And Actual Market Returns

The performances of the MSCI and S&P low-volatility indexes make the evidence much more than just academic.
Li shows in a recent paper that low-beta stocks have outperformed over 5, 10, and 20-year comparisons.
From mid-1991 to early 2012, a 20-year plus time horizon, the S&P low volatility index returned an average of 10.2% annually against a return of 8.7% for the S&P 500.
For both domestic and international equities, the low volatility stocks also resulted in much higher Sharpe ratios.
They also have average correlations of .4% to .5% with other major asset classes, smoothing out overall performance. Traditional large-cap equity strategies have a correlation of .6%.
One lag period in low-beta stock performance was during the dot com bubble in the late 1990s.
But in the bull market of 2003 – 2006, low-beta stocks showed superior performance with international stocks approaching annual returns of 30%.
Low-beta portfolios may provide less risk and higher return for investors seeking greater diversification and more attractive risk/return strategies.

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