Alpha Architect Research Blog

The Long Volatility Premium: Short the Market, Get Paid?

Patrick Kazley’s new paper argues that the apparent drag from buying put options is largely a hidden short‑beta exposure, not an inherent cost of long volatility. By neutralizing this beta, a pure long‑volatility factor delivers positive returns over time. The study decomposes the put‑portfolio’s performance, showing that once the “benign beta” is removed, volatility itself acts as a distinct, rewarding factor. Investors can therefore treat tail‑hedging as a diversifier or a lever to re‑add risk in a controlled way.