@article {Aw1, author = {Edward N.W. Aw and John Q. Jiang and Gregory Y. Sivin and Aye M. Soe}, title = {Practical Applications of Oasis or Mirage: Assessing Low-Risk Investing from a Global Perspective}, volume = {6}, number = {3}, pages = {1--6}, year = {2019}, doi = {10.3905/pa.6.3.309}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In Oasis or Mirage: Assessing Low-Risk Investing from a Global Perspective, in the Summer 2018 issue of The Journal of Investing, Edward Aw, John Jiang, Gregory Sivin (all of Bessemer Trust), and Aye Soe (of S\&P Dow Jones Indices) discuss why low-risk strategies generally outperform market-cap-weighted indices. Such outperformance, the authors state, {\textquotedblleft}gives rise to {\textellipsis} low-risk anomalies{\textquotedblright} that contravene the assumption that a market-weighted portfolio is the optimal way to balance investment risk and return.To verify the existence of a low-risk anomaly, the authors build a low-risk portfolio of stocks (LRPS) and a low-risk stock portfolio (LRSP), each designed to implement a low-volatility global equity strategy. The authors find that the two portfolios are equally effective in reducing realized volatility relative to a global market-cap-weighted benchmark but that their monthly excess returns over that benchmark are not statistically significant. However, by adding expected returns to the scheme for constructing the low-risk portfolios, the authors find that the modified portfolios outperform to a statistically significant degree.TOPICS: Security analysis and valuation, equity portfolio management, risk management}, issn = {2329-0196}, URL = {https://pa.pm-research.com/content/6/3/1.15}, eprint = {https://pa.pm-research.com/content/6/3/1.15.full.pdf}, journal = {Practical Applications} }