TY - JOUR T1 - Practical Applications of Oasis or Mirage: <em>Assessing Low-Risk Investing from a Global Perspective</em> JF - Practical Applications SP - 1 LP - 6 DO - 10.3905/pa.6.3.309 VL - 6 IS - 3 AU - Edward N.W. Aw AU - John Q. Jiang AU - Gregory Y. Sivin AU - Aye M. Soe Y1 - 2019/01/31 UR - https://pm-research.com/content/6/3/1.15.abstract N2 - 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&amp;P Dow Jones Indices) discuss why low-risk strategies generally outperform market-cap-weighted indices. Such outperformance, the authors state, “gives rise to … low-risk anomalies” 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 ER -