The Low Volatility Anomaly in Sweden and its Presence During the Covid-19 Pandemic

Abstract

Investing in the stock market has interested people for a long time as the hope to generate high returns has been an incentive to risk one’s money. From this argumentation has a general relationship between risk-and-return been created. The great performance of low risk stocks is an abnormality that has confused economists for a long time as it goes against the fundamental principle of the risk-and-return relationship, where this phenomenon is known as the Low Volatility Anomaly. This thesis aimed to investigate the low volatility anomaly and its presence on the Swedish stock market as well as its presence during the Covid-19 crisis. The analysis was done on historical data from the OMX Stockholm 30 index and the stocks listed on it between 2005-01-03 and 2022-04-29, together with four different market stages during this time period. The result shows no conclusive evidence of the low volatility anomaly on the Swedish market except during the Covid-19 crisis. Future work could include a deeper analysis of the reasons why the Covid-19 crisis showed clearer evidence of the low volatility anomaly.