We investigate whether transaction costs, arbitrage risk, and short-sale impediments explain the abnormal returns of volatility-managed equity portfolios. Even using six cost-mitigation strategies, after transaction costs, volatility management of asset-pricing factors besides the market return generally produces zero abnormal returns and significantly reduces Sharpe ratios. In contrast, abnormal returns of the volatility-managed market portfolio are robust to transaction costs and concentrated in the most easily arbitraged stocks, those with low arbitrage risk and impediments to short selling. Moreover, the managed market strategy only provides superior performance when sentiment is high, consistent with prior theory that sentiment traders underreact to volatility.

我们调查交易成本，套利风险和卖空障碍是否能解释波动率管理的股票投资组合的异常收益。即使使用六种降低成本的策略，在扣除交易成本之后，除市场收益外，资产定价因素的波动性管理通常也会产生零异常收益，并显着降低Sharpe比率。相比之下，由波动率管理的市场投资组合的异常收益对交易成本稳定，并且集中在最容易套利的股票上，即那些套利风险低且存在卖空障碍的股票。而且，只有在市场情绪高涨时，管理市场策略才能提供优异的业绩，这与市场先前对情绪交易者对波动反应不足的理论相一致。