In investing and finance, the low-volatility anomaly is the observation that low-volatility stocks have higher returns than high-volatility stocks in most markets studied. This is an example of a stock market anomaly since it contradicts the central prediction of many financial theories that taking higher risk must be compensated with higher returns. Other narratives of this anomaly show that even stocks with higher idiosyncratic risk are compensated with lower returns in comparison to stocks with lower idiosyncratic risk.