
Wine Basics
Wine Investing
Apr 24, 2025
The Low Volatility Anomaly (2024)
Volatility can be fairly simply defined as the variance of a data set around its mean. The classic Capital Asset Pricing Model (CAPM) view is that returns are a positive and linear function of beta, or volatility. The higher the volatility, the higher the predicted returns.

Source:Underlying data from investing.com, Liv-ex as of 01/01/2024. Liv-ex indices data can be found at https://www.liv-ex.com/news-insights/indices/
There is however a pool of research suggesting that this isn’t the case. Pim Van Vliet, PhD grouped portfolios by volatility in his book “High Returns from Low Risk: A Remarkable Stock Market Paradox” and found that the portfolio with the lowest volatility outperformed that with the highest.
Why is this? There are a few reasons, but for us at WineFi the most compelling is that we as humans are risk averse. We dislike losing more than we like winning. This leads to higher demand for assets where the risk of losing is lower.
As with all things, there is more nuance than we’re able to fit in a short blog post… the point we’re trying to make is that low volatility doesn’t necessarily mean low returns.
Sources: Sources (Liv-ex, Pim van Vliet, PhD, and this excellent Wikipedia page)
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