The low volatility anomaly . three things to keep
Low vol does not mean low return. It means lower variance drag. Different thing entirely.
01
Recovery is asymmetric. A 50 pct loss needs 100 pct to break even. The boring stocks pay you for not having to climb back.
02
Variance is a tax on compounding. Same average return, lower sigma, more money at the end. Sigma squared over two is the line item.
03
The market still has not arbitraged this away. Humans pay up for the lottery ticket. Forty-something years of math, still working.
If your portfolio is loud and you are proud of the rallies, look at the drawdown column. The recovery is where compounding actually lives.rupeecase.com / learn
Anomaly first published Haugen and Heins 1975 . Frazzini Pedersen formalised Betting Against Beta in Journal of Financial Economics 2014 . cited here for educational reference only.