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On the performance of volatility-managed equity factors — International and further evidence

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  • Schwarz, Patrick

Abstract

I study the performance of nine (downside) volatility-managed equity factors before and after considering transaction costs in 45 international equity markets. My results suggest that volatility management is most promising for market, value, profitability, and especially momentum portfolios. The performance of volatility-managed market and value portfolios can be further enhanced by applying downside volatility as a scaling factor. Nevertheless, only the managed market and momentum strategies are partially robust to transaction cost suggesting that the persistence of abnormal returns can largely be explained by the associated transaction costs. Cross-country analysis suggests that the slow trading hypothesis is partially able to explain cross-country performance differences of volatility-managed value and momentum portfolios. Finally, performance decomposition analysis reveals additional suggestive evidence in support of the slow trading hypothesis.

Suggested Citation

  • Schwarz, Patrick, 2025. "On the performance of volatility-managed equity factors — International and further evidence," Journal of Empirical Finance, Elsevier, vol. 80(C).
  • Handle: RePEc:eee:empfin:v:80:y:2025:i:c:s092753982400094x
    DOI: 10.1016/j.jempfin.2024.101560
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    More about this item

    Keywords

    Volatility-managed portfolio; Transaction costs; Factor timing; Culture; International stock markets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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