West Loop Financial LLCRevisiting Anomalies’ Persistence – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 Revisiting Anomalies’ Persistence https://www.westloopfinancial.com/2015/01/19/revisiting-anomalies-persistence/ https://www.westloopfinancial.com/2015/01/19/revisiting-anomalies-persistence/#respond Mon, 19 Jan 2015 09:00:37 +0000 http://evolvemypractice.com/?p=1620 An article I wrote in September discussed the findings of the study, “Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly,” in which the authors proposed a new explanation for why anomalies (such as the low-beta/low-volatility anomaly) persist. They hypothesized that the typical institutional investor’s mandate to maximize the ratio of excess returns relative to...

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]]> An article I wrote in September discussed the findings of the study, “Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly,” in which the authors proposed a new explanation for why anomalies (such as the low-beta/low-volatility anomaly) persist.

They hypothesized that the typical institutional investor’s mandate to maximize the ratio of excess returns relative to a fixed benchmark without resorting to leverage can affect the relationship between risk and expected return.

Many institutional investors who are in a position to offset an irrational demand for risky assets also have fixed benchmark mandates that are typically capitalization-weighted. Thus, straying from the benchmarks to exploit anomalies creates career risk.

Read the rest of the article on ETF.com.

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