DeMiguel, V, Martin-Utrera, A and Uppal, R (2024) A Multifactor Perspective on Volatility-Managed Portfolios. Journal of Finance. ISSN 0022-1082 (In Press)
Abstract
Moreira and Muir question the existence of a strong risk-return trade-off by showing that investors can improve performance by reducing exposure to risk factors when their volatility is high. However, Cederburg et al. show that these strategies fail out-of-sample, and Barroso and Detzel show they do not survive transaction costs. We propose a conditional multifactor portfolio that outperforms its unconditional counterpart even out-of-sample and net of costs. Moreover, we show that factor risk prices generally decrease with market volatility. Our results demonstrate that the breakdown of the risk-return trade-off is more puzzling than previously thought.
More Details
Item Type: | Article |
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Subject Areas: | Management Science and Operations |
Date Deposited: | 29 Oct 2024 13:52 |
Date of first compliant deposit: | 21 May 2024 |
Last Modified: | 05 Nov 2024 02:25 |
URI: | https://lbsresearch.london.edu/id/eprint/3716 |