Low Volatility Investing in BIST: Lower Risk without Lower Return

One of the tenets of equilibrium asset pricing models is that expected return of an asset is positively related to its risk (price variability of the asset). In other words, it is expected that assets with higher expected returns are also the ones with higher risk, or assets with lower risk are the ones with lower expected returns. The logic behind this idea is actually is simple and intuitive: if there are assets with lower risk without lower expected return, actors in financial markets will immediately invest in those assets, increase its price and so lower its expected return. Hence, such kind of profitable opportunities are expected to disappear in equilibrium in a short time.