Journal Article

Fact and Fiction About Low-Risk Investing

Topics - Factor/Style Investing Defensive Equities

${ numberSection } ${ text }
Fact and Fiction About Low-Risk Investing

Low-risk investing within equities and other asset classes has received a lot of attention over the past decade. An intensive academic debate has spurred, and been spurred by, the growing market for low-risk strategies. This article presents five fact and dispels five fictions about low-risk investing. The facts are: Low-risk returns have been

  1. strong historically,
  2. highly significant out-of-sample,
  3. robust across many countries and asset classes, and
  4. backed by strong economic theory, but, nevertheless,
  5. can be negative when the market is down.

The fictions that this article dispels are that low-risk investing

  1. delivers weaker returns than other common factor premia,
  2. is mostly about betting on bond-like industries,
  3. is especially sensitive to transaction costs and only works among small-cap stocks, and
  4. have become so expensive that they cannot do well going forward. Lastly, the article dispels the fiction
  5. that CAPM is dead and so is low-risk investing – this statement is a contradiction; If the CAPM is dead, then low-risk investing is alive.
Published In

The Journal of Portfolio Management

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Neither the author nor AQR undertakes to advise you of any changes in the views expressed herein.


This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein.


Past performance is no guarantee of future results.


Certain publications may have been written prior to the author being an employee of AQR.


The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees.