EXECUTIVE SUMMARY

This paper examines the potential benefits of blending high dividend and low volatility strategies in the China A-share large-cap equity market.

•  Excluding high volatility stocks from a high-dividend-yield portfolio may reduce portfolio volatility and improve portfolio returns on a risk-adjusted basis.

•  The S&P China A-Share LargeCap Low Volatility High Dividend 50 Index overlays a low volatility screen on high dividend stocks. For the period from Jan. 31, 2009, to June 28, 2019, the index delivered pronounced excess returns on an absolute and risk-adjusted basis.

•  This index delivered a stable source of income from dividends and showed defensive qualities, with reduced drawdown during down markets.

•  The active exposure to dividend yield, low volatility, and value factors contributed most to the active returns, while the sector allocation bias accounted for most of the active risk for the index.