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The Robeco low volatility team published their study of the low volatility effect in developing markets. David Blitz, Juan Pang and Pim van Vliet (2012) document the following:

In this paper we examine the empirical relation between risk and return in emerging equity markets and find that this relation is flat, or even negative. This is inconsistent with theoretical models such as the CAPM, which predict a positive relation, but consistent with the results of studies which have previously examined the empirical relation between risk and return in the U.S. and other developed equity markets.

This is important because while this effect has been well-documented in the developed countries, these are the first results for the BRICs and their ilk. The basic metric they used was to rank stocks by volatility, and create long-short portfolios based on the extremum quintiles. The result is a percent return number that is independent of any currency fluctuations. Total volatility as a sorting criterion works better than beta, but they have similar results. The effects are not concentrated in the smaller cap stocks, though clearly excluding these firms lessens the effect (i.e, if only because the extremums within 200 stocks are less than extremums within 400 stocks). If there was ever a strong rejection of a theory, this is it, as 17 out of 19 countries showing low volatility stocks outperforming high volatility stocks. So, it exists in the US back to 1926, and in 95+% of other markets in their various time samples (in this paper, generally 1989-2010). That's a pretty clear pattern. Perhaps now we can move on to the more interesting question of why this happens, and what this means for standard asset pricing theory.

From The Volatility Effect in Emerging Markets, 1989-2010, Table 2

CountryLong High Vol/

Short Low Vol Return

t-stat
Argentina-17.6%-1.54
Brazil-11.9%-0.93
Chile-5.3%-1.25
China-21.8%-2.82
Egypt-19.3%-2.31
Greece-16.4%-1.57
India-15.7%-2.69
Indonesia-5.9%-0.79
Israel-15.7%-2.62
Korea-14.4%-2.71
Malaysia-11.2%-1.38
Mexico1.3%0.31
Philippines-6.9%-0.53
Poland-9.5%-1.23
Russia3.6%0.33
South Africa-6.9%-1.18
Taiwan-1.4%-0.29
Thailand-11.1%-2.01
Turkey-3.2%-0.54

Source: The Low Volatility Effect In Emerging Markets