Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly

By Malcolm P. Baker, Brendan O. Bradley, Jeffrey Wurgler. 2011

769 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/08b2e4ffcfefe5420243c832274633e69288b893

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Deep learning with long short-term memory networks for financial market predictions (2017, background): “AC CE PT ED M AN US CR IP T beta can be an important return predictive signal - see Baker et al. (2011); Frazzini and Pedersen (2014); Hong and Sraer (2016), and a higher beta is a key characteristic of the selected stocks. Also, skewness is similar to the general market, and the returns of the top ”
Speculative Betas: Speculative Betas (2016, neutral): “7 High beta stocks might also be more diﬃcult to arbitrage because of incentives for benchmarking and other agency issues (Brennan (1993), Baker et al. (2011).) those of low beta ones.”
Low‐Risk Anomalies? (2020, neutral): “(2013), both, use the ex-ante skew measure of Bakshi et al. (2003) but find a positive and negative relation to subsequent returns, respectively.”
Manager sentiment and stock returns (2019, background): “Baker and Wurgler (2006, 2007, 2011, 2012), Yu and Yuan (2011), Baker, Wurgler, and Yuan (2012), Stambaugh, Yu, and Yuan (2012), Huang, Jiang, Tu, and Zhou (2015), and many others provide strong evidence of return predictability with stock market-based investor sentiment measures. Bergman and Roycho”
The risk-adjusted return potential of integrating ESG strategies into emerging market equities (2018, background): “Volatility-based strategies are based on the idea that low-volatility stocks provide higher returns than high-volatility stocks (see Baker, Bradley, and Wurgler 2011; Dutt and Humphery-Jenner 2013).”
The Cross-Section of Stock Returns in Frontier Emerging Markets (2012, positive): “When they wish to increase expected returns without employing leverage they are forced to buy high-risk stocks (under the assumption that expected returns and risk are positively correlated); see Black (1972), Falkenstein (2009), and Baker, Bradley, and Wurgler (2011).”
Measuring Equity Risk with Option-Implied Correlations (2012, methodology): “We also perform a formal monotonicity test of the risk-return relation, applying the 15This portfolio-sorting methodology is similar to the early study of Black, Jensen, and Scholes (1972), as well as that of Baker, Bradley, and Wurgler (2011).”
A Theory of Firm Characteristics and Stock Returns: The Role of Investment-Specific Shocks (2012, positive): “The difficulty of standard models in reproducing the negative relation between market betas and future returns has led to several recent explanations based on market frictions (e.g., Frazzini and Pedersen, 2010; Baker et al., 2011; Hong and Sraer, 2012).”
Will My Risk Parity Strategy Outperform? (2012, neutral): “Cowan and Wilderman (2011) provided a rational explanation for the low-risk anomaly, and Baker, Bradley, and Wurgler (2011) offered a behavioral explanation.”