The Test Bench › index_rule

Does Lowest-Volatility 100 actually work?

MARGINAL

Real but small -- not worth what it costs to run.

The claim

Hold the 100 calmest stocks (lowest trailing volatility), equal-weight — Low-vol 'anomaly' crowd

What we did

Tested against Cap-weight SPY, buy & hold, 2017-2026, 100-stock equal-weight, annual rebalance, survivorship-free.

The result

Result: 6.9 %/yr CAGR (cap-weight = +12.5)

+6.9%/yr CAGR, Sharpe 0.49, maxDD -43% (2017-21 +11/yr, 2022-now +3/yr)

Verdict

Defensive as advertised, but it lagged badly in a bull (+7%/yr vs cap-weight's +12). A smoother ride to a smaller number. Earns its keep only if you weight risk-adjusted return over absolute -- most buy-and-holders don't.

What the test did and did not do

survivorship-free universe
point-in-time data
checked for look-ahead
net of real costs
tested out of sample

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

← Invesco S&P 500 Momentum (SPMO) All findings Most Expensive 100 by P/E (hot growth) →

Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.