Baker, M.P., Bradley, B.O., & Wurgler, J. (2010). Benchmarks as Limits to Arbitrage: Understanding the Low-Volatility Anomaly.

Contrary to basic finance principles, high-beta and high-volatility stocks have long underperformed low-beta and low-volatility stocks. This anomaly may be partly explained by the fact that the typical institutional investor’s mandate to beat a fixed benchmark discourages arbitrage activity in both high-alpha, low-beta stocks and low-alpha, high-beta stocks… [Read More]