Volatility can be described as a measure of the dispersion of stock price returns, around the average. Past theory suggested that more volatility resulted in higher reward and hence better returns (“the higher the risk, the higher the return”– sound familiar?). However, it was found that low-volatility stocks (stocks exhibiting a more stable experience through time) outperformed high-volatility stocks. This is widely described as the low-volatility anomaly. Beta is a measure comparing the movements of a stock’s price against the market as a whole. A low beta would indicate that a stock is less likely to respond to extreme market movements.
The NewFunds Low Volatility Equity ETF is aimed at providing an Investor with diversified exposure to 20 highly liquid constituent securities in the South African equity market that exhibit the lowest volatility as well as a low beta to the market in their performance by tracking the Absa Wits Risk-Controlled SA Low Volatility Index where the constituent security’s weights in the Low Volatility Index is determined by applying an equal risk contribution weighting scheme. The Low Volatility Index was created by Absa Bank Limited in collaboration with Wits University using their Findata@Wits® database. The ETF is total return in nature therefore all dividends and income received in the Portfolio is reinvested at each income distribution date.
Performance graph data to follow.
Wits SA Factor Research presentation
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