“Taking some of the sting out of market sell-offs may lead to improved returns, as investors may be less likely to sell during bear markets if these strategies’ drawdowns are relatively smaller,” Oey said. “Conversely, these strategies likely will underperform during strong bull markets.”
Investors can also capitalize on the better risk-adjusted returns.
“In practice, low-volatility strategies historically have generated better risk-adjusted returns relative to their corresponding cap-weighted indexes over the long term,” Oey added.
For more information on the emerging markets, visit our emerging markets category.
Max Chen contributed to this article.