We conduct a volatility decomposition to identify the source of performance differences between low volatility and high volatility mutual funds. Higher return covariances between fund holdings is associated with more fund-level exposure to the idiosyncratic volatility effect. The average...

We conduct a volatility decomposition to identify the source of performance differences between low volatility and high volatility mutual funds. A higher level of return covariance of fund holdings is associated with more fund-level exposure to the idiosyncratic volatility effect. Average...

We conduct a volatility decomposition to identify the source of performance differences between low volatility and high volatility mutual funds. Our procedure demonstrates how security-level variances and covariances lead to idiosyncratic volatility effects at the portfolio level. We show that a...