The Rational Reminder Podcast | Pim van Vliet: The Volatility Effect, Revisited | Rational Reminder 264 @rationalreminder | Uploaded August 2023 | Updated October 2024, 19 hours ago.
Pim van Vliet is on a mission to put the low volatility factor on the map. In his role as Head of Conservative Equities and Chief Quantitative Strategist at Robeco, he focuses on leveraging the effect of low-risk investing. Pim has also published a book, High Returns From Low Risk: A Remarkable Stock Market Paradox, where he unpacks some of the key aspects that guide his work and underpin his success. During this conversation, Pim shares his insights on volatility, the changing market, and combining low-risk with other traditional factors. He equips listeners with key considerations for evaluating strategies or products when allocating low-risk and offers his perspective on out-of-sample-testing, distinguishing between global-factor and cross-sectional premiums, and more. Listeners will get Pim’s perspective on the pros and cons of the Sharpe ratio, and we examine risk-adjusted returns on long and short legs before hearing his Fama-French Five Factor Model analysis. We touch on inflation and gold, and finally, Pim shares his inspiring perspective on success in his financial and personal life. Tune in today to hear more!
Timestamps:
0:00:00 Intro
0:05:44 Pim defines the low-risk effect
0:07:24 How the magnitude of the low-risk premium compares to other equity premiums
0:10:57 How pervasive the low-risk effect is in asset classes other than stocks
0:14:26 How a low-risk portfolio performs relative to the market in up and down periods
0:16:17 The theoretical explanations for the low-risk effect
0:24:55 Pim explains whether or not it make senses to combine low-risk with other known factors in a portfolio
0:29:21 What an investor should they consider in evaluating strategies and products when allocating to low-risk
0:31:27 How Pim assembled the data set for his paper looking at the cross section of returns from 1866 to 1926
0:39:32 What Pim learned from his sample about the economic explanations for factor premiums
0:42:00 Pim describes the difference between a global factor premium and the cross sectional premiums
0:44:35 Pim describes how confident investors should be that factors are a “real” thing
0:50:50 Describing whether the long leg or short leg tends to offer better risk-adjusted returns
0:53:21 Pim's concerns with Fama and French’s Five-Factor model
0:59:35 Pim defines inflation regimes mentioned in one of his papers
1:01:43 The worst economic environment for investors
1:04:27 The downsides of getting downside protection from gold
1:07:59 Pim defines success in his life
Participate in our Community Discussion about this Episode:
community.rationalreminder.ca/t/episode-264-pim-van-vliet-the-volatility-effect-revisited-discussion-thread/24622
Book From Today’s Episode:
High Returns From Low Risk: A Remarkable Stock Market Paradox — amzn.to/3rMkJxQ
Links From Today’s Episode:
Rational Reminder on iTunes — itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — rationalreminder.ca
Shop Merch — shop.rationalreminder.ca
Join the Community — community.rationalreminder.ca
Follow us on Twitter — twitter.com/RationalRemind
Follow us on Instagram — @rationalreminder
Benjamin on Twitter — twitter.com/benjaminwfelix
Cameron on Twitter — twitter.com/CameronPassmore
Pim van Vliet on Twitter — twitter.com/paradoxinvestor
Pim van Vliet — paradoxinvesting.com
'The Volatility Effect' — robeco.com/files/docm/docu-the-volatility-effect-2007.pdf
'The Volatility Effect Revisited' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3442749
'Ten Things You Should Know About Low-Volatility Investing' — robeco.com/en-int/insights/2017/07/ten-things-you-should-know-about-minimum-volatility-investing
'The Conservative Formula: Quantitative Investing Made Easy' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3145152
'Media attention and the volatility effect' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3403466
'When Equity Factors Drop Their Shorts' — robeco.com/en-int/insights/2021/02/when-equity-factors-drop-their-shorts
'The Cross-Section of Stock Returns before CRSP' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3969743
'Global factor premiums' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3325720
'Investing in Deflation, Inflation, and Stagflation Regimes' — papers.ssrn.com/sol3/papers.cfm?abstract_id=4153468
'Five Concerns with the Five-Factor Model' — papers.ssrn.com/sol3/papers.cfm?abstract_id=2862317
'The golden rule of investing' — robeco.com/en-int/insights/2023/04/the-golden-rule-of-investing
Pim van Vliet is on a mission to put the low volatility factor on the map. In his role as Head of Conservative Equities and Chief Quantitative Strategist at Robeco, he focuses on leveraging the effect of low-risk investing. Pim has also published a book, High Returns From Low Risk: A Remarkable Stock Market Paradox, where he unpacks some of the key aspects that guide his work and underpin his success. During this conversation, Pim shares his insights on volatility, the changing market, and combining low-risk with other traditional factors. He equips listeners with key considerations for evaluating strategies or products when allocating low-risk and offers his perspective on out-of-sample-testing, distinguishing between global-factor and cross-sectional premiums, and more. Listeners will get Pim’s perspective on the pros and cons of the Sharpe ratio, and we examine risk-adjusted returns on long and short legs before hearing his Fama-French Five Factor Model analysis. We touch on inflation and gold, and finally, Pim shares his inspiring perspective on success in his financial and personal life. Tune in today to hear more!
Timestamps:
0:00:00 Intro
0:05:44 Pim defines the low-risk effect
0:07:24 How the magnitude of the low-risk premium compares to other equity premiums
0:10:57 How pervasive the low-risk effect is in asset classes other than stocks
0:14:26 How a low-risk portfolio performs relative to the market in up and down periods
0:16:17 The theoretical explanations for the low-risk effect
0:24:55 Pim explains whether or not it make senses to combine low-risk with other known factors in a portfolio
0:29:21 What an investor should they consider in evaluating strategies and products when allocating to low-risk
0:31:27 How Pim assembled the data set for his paper looking at the cross section of returns from 1866 to 1926
0:39:32 What Pim learned from his sample about the economic explanations for factor premiums
0:42:00 Pim describes the difference between a global factor premium and the cross sectional premiums
0:44:35 Pim describes how confident investors should be that factors are a “real” thing
0:50:50 Describing whether the long leg or short leg tends to offer better risk-adjusted returns
0:53:21 Pim's concerns with Fama and French’s Five-Factor model
0:59:35 Pim defines inflation regimes mentioned in one of his papers
1:01:43 The worst economic environment for investors
1:04:27 The downsides of getting downside protection from gold
1:07:59 Pim defines success in his life
Participate in our Community Discussion about this Episode:
community.rationalreminder.ca/t/episode-264-pim-van-vliet-the-volatility-effect-revisited-discussion-thread/24622
Book From Today’s Episode:
High Returns From Low Risk: A Remarkable Stock Market Paradox — amzn.to/3rMkJxQ
Links From Today’s Episode:
Rational Reminder on iTunes — itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582.
Rational Reminder Website — rationalreminder.ca
Shop Merch — shop.rationalreminder.ca
Join the Community — community.rationalreminder.ca
Follow us on Twitter — twitter.com/RationalRemind
Follow us on Instagram — @rationalreminder
Benjamin on Twitter — twitter.com/benjaminwfelix
Cameron on Twitter — twitter.com/CameronPassmore
Pim van Vliet on Twitter — twitter.com/paradoxinvestor
Pim van Vliet — paradoxinvesting.com
'The Volatility Effect' — robeco.com/files/docm/docu-the-volatility-effect-2007.pdf
'The Volatility Effect Revisited' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3442749
'Ten Things You Should Know About Low-Volatility Investing' — robeco.com/en-int/insights/2017/07/ten-things-you-should-know-about-minimum-volatility-investing
'The Conservative Formula: Quantitative Investing Made Easy' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3145152
'Media attention and the volatility effect' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3403466
'When Equity Factors Drop Their Shorts' — robeco.com/en-int/insights/2021/02/when-equity-factors-drop-their-shorts
'The Cross-Section of Stock Returns before CRSP' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3969743
'Global factor premiums' — papers.ssrn.com/sol3/papers.cfm?abstract_id=3325720
'Investing in Deflation, Inflation, and Stagflation Regimes' — papers.ssrn.com/sol3/papers.cfm?abstract_id=4153468
'Five Concerns with the Five-Factor Model' — papers.ssrn.com/sol3/papers.cfm?abstract_id=2862317
'The golden rule of investing' — robeco.com/en-int/insights/2023/04/the-golden-rule-of-investing
