Think twice about low volatility funds

Dominic McCormick | Select Asset Management | 22 April 2013

The "low volatility" or "low beta" anomaly seems to be the new Holy Grail in investment markets. This is the premise, well documented by studies of historical returns in most major sharemarkets, that low volatility or low beta stocks outperform high volatility/high beta stocks over the long term.

One study of US stocks between 1968 to 2008 showed that stocks in the bottom 20% based on past volatility outperformed those in the top 20% by a compounded...