The profitability of low-volatility

David Blitz, Milan Vidojevic*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


Low-risk stocks exhibit higher returns than predicted by established asset pricing models, but this anomaly seems to be explained by the new Fama-French five-factor model, which includes a profitability factor. We argue that this conclusion is premature given the lack of empirical evidence for a positive relation between risk and return. We find that exposure to market beta in the cross-section is not rewarded with a positive premium, regardless of whether we control for the new factors in the five-factor model. We also observe stronger mispricing for volatility than for beta, which suggests that the low-volatility anomaly is the dominant phenomenon. We conclude that the low-risk anomaly is not explained by the five-factor model.

Original languageEnglish
Pages (from-to)33-42
Number of pages10
JournalJournal of Empirical Finance
Publication statusPublished - 1 Sept 2017


  • Betting against beta
  • Low beta
  • Low volatility
  • Profitability

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