The low-volatility anomaly in the Norwegian stock market

Abstract

In this thesis, we find that the low-volatility anomaly is present on Oslo Stock Exchange in the period 1990 to 2016. The study is performed using a filtered sample of 628 securities, sorted by idiosyncratic volatility on daily returns into quintile portfolios with a holding period of one month. The portfolios are value- and equally weighted, both leading to the same conclusion. The performance evaluation is based on returns, the sign and significance of the alphas, and the Sharpe ratios. We find that the low-volatility portfolio outperforms the high-volatility portfolio, and that performance decreases monotonically with increased risk. Thus we conclude that there exists a low-volatility anomaly on the Norwegian stock market.