The Low Risk Anomaly Revisited on High-Frequency Data

Under the CAPM assumptions, the market capitalization weighted portfolio is mean-variance efficient. In real world applications it has been shown by various authors that low risk portfolios outperform the market capitalization weighted portfolio. We revisit this anomaly using high-frequency data to construct low risk portfolios for the S&P 500 constituents over the period 2007-2012. The portfolios that we consider are invested in the 100 lowest risk stocks and apply either equal-weighting, market capitalization weighting or inverse risk weighting. We find that the low risk anomaly is also present when using high-frequency data, and for downside risk measures like semivariance and Cornish-Fisher value-at-risk. For the portfolios considered, there does not seem to be any statistically or economically significant gain of using high-frequency data