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Volatility Targeting.pdf

Risk Before Return - Targeting Volatility with Higher Frequency Data-FINAL.pdf

🔗 Source: saltfinancial.com

📊 Size: 872 KB

📄 Pages: 7 pages

⬇️ Downloads: 143

Summary

Volatility is easier to predict than future returns, and dynamically targeting it can lead to higher risk-adjusted returns. The Cboe Volatility Index (VIX) can be a useful indicator, but may not be ideal for targeting risk. Higher frequency data can improve performance in volatility targeting strategies, which compare favorably to trend-following strategies in reducing risk. Targeting volatility at 10% using 30-day trailing historical volatility (30D HV) or VIX as forecasts with dynamic daily rebalancing can reduce volatility and drawdowns, but may result in lower absolute returns. The VIX-based strategy underperformed the 30D HV strategy, with lower compound returns and a lower Sharpe ratio, due to overestimating volatility and taking too little risk.

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Description

Volatility is easier to predict than future returns, and dynamically targeting it can lead to higher risk-adjusted returns.

Technical Information

File Format: PDF
File Size: 872 KB
Pages: 7
Language: EN
Total Downloads: 143
Last Updated: 18 hours ago

Document Overview

This PDF document about Volatility Targeting provides comprehensive information and guidance. Whether you're a beginner or advanced user, this resource offers valuable insights into Volatility Targeting.