%0 Journal Article
%A De Franco, Carmine
%A Monnier, Bruno
%A Rulik, Ksenya
%T Interest Rate Exposure of Volatility Portfolios
%D 2017
%R 10.3905/jii.2017.8.2.053
%J The Journal of Index Investing
%P 53-67
%V 8
%N 2
%X The authors assess the exposure of stock portfolios sorted by total volatility to interest rate risk and determine whether this nonequity risk can explain differences in risk and risk-adjusted returns between low- and high-volatility portfolios over a 25-year period for U.S. equities. They find that the addition of an interest rate risk factor to the four-factor model reveals a small but positive duration for low-volatility portfolios. However, this new factor fails to improve the explanatory power of the model for both low- and high-volatility portfolios and has no significant impact on the portfoliosâ€™ risk-adjusted return. The authors find that interest rate factor loadings are fairly robust across different specifications of the multifactor model for low-volatility portfolios but are unstable for high-volatility portfolios. For all volatility portfolios under study, the significance of the results is highly dependent on the choice of time period.
%U https://jii.pm-research.com/content/iijindinv/8/2/53.full.pdf