Risk and Return Characteristics of Global Minimum Variance Portfolio

Abstract

In this paper, we investigate characteristics of minimum variance portfolios (“MVP”) and market-cap weighted portfolios (“CWP”), using data for a number of stock markets in developed countries. We show performance of MVPs is more efficient than CWPs for most of these countries. Furthermore, we construct volatility-ranked portfolios of Japan stocks and demonstrate that stocks with high volatility tend to underperform. We provide evidence that risk / return are not a trade-off.