Thanks, Usman. The empirical results provided by Baker & Haugen are interesting; unfortunately the paper itself is very strange and detracts considerably from the empirics. (For example, the paper puts a great deal of weight on a conspiracy theory regarding the academic research process; it also misrepresents the Fama & French research egregiously and unnecessarily.)

There are much better discussions of the "low volatility anomaly" or "volatility puzzle." One good example is by Lionel Martellini of EDHEC Business School (http://www.edhec-risk.com/latest_news/featured_analysis/RISKArticle.201…), and another is by Aye Soe of Standard & Poor's (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2128634).

Investors and investment managers should know that the low volatility anomaly doesn't necessarily apply over investment horizons longer than one month, which is what Baker & Haugen used. Take a look at the paper by Huang, Liu, Rhee & Zhang published in Journal of Investment Management (2011) and available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1364571.