Volatility-managed portfolios

: insights from 153 factors in global markets

Abstract

This Dissertation investigates the impact of volatility-managed portfolios across a set of 153 factors and 13 themes, segmented by Developed and Emerging markets. I demonstrate that dynamically adjusting portfolio risk in response to volatility enhances alpha, sharpe ratio, and mean-variance utility. This analysis demonstrates that volatility timing improves the perfor- mance of not only well-known factors like value, momentum, and profitability but also the vast majority of the 153 factors examined, across all countries and regions tested. This analysis aligns with the findings of Volatility-Managed Portfolios by Moreira and Muir (2017), challenging risk-based models and structural assumptions of time-varying expected returns. It shows how managed portfolios that take a cautious approach during high-volatility periods can have a real edge, providing practical insights for investors in both Developed and Emerging Markets who want to get the most out of factor-based strategies. However, as per the findings of Cederburg et al. (2020), the out-of-sample (OOS) results for these strategies are not as strong as one might expect based on the in-sample analysis.

Date of Award	27 May 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Faias (Supervisor)