Validea: This is by far one of the very top strategies in terms of picking stocks that go on to produce positive gains

"There is an age-old concept in investing that the more risk you take the higher the return you should get. This makes a lot of sense; investors don’t invest in a risky companies to get low returns. Most hope to be compensated for that extra risk. But the tradeoff of risk and return is flipped upside down when talking about the most and least volatile stocks in the equity market. What the data shows is that the highest beta stocks actually underperform the stocks with lower volatility. What’s more, when you apply a volatility factor to things like size and value you actually get additional levels of alpha generation.

 

So the lower the risk, or volatility in stocks, the better your results could be. This market anomaly was flushed out further in research and testing done by Pim van Vliet and his colleagues. Van Vliet, who is the Head of the Conservative Equities team at Robeco, a leading international asset manager, and co-author, Jan de Koning, published a book, High Returns from Low Risk: A Remarkable Stock Market Paradox.

 

The authors combine real world asset management expertise with research and long term data to support the idea of harvesting the low volatility premium through a systematic model using volatility and other sensible fundamental factors." 

 


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