Low volatility anomaly
The observation that securities with a narrower price range returned no less, and at times more, than riskier ones — which contradicts the idea of payment for risk.
How to read the number
One explanation is the constraint on leverage: those who want more return are pushed into buying riskier names, lifting their price and lowering the future result.
When the metric lies
Selecting on a calm past easily narrows a portfolio to one or two sectors and to names sensitive to rates. Quietness in a price is sometimes not an absence of risk but merely an absence of trades.
Also known as: low beta anomaly