Volatility Targeting: The Bridge Between Options-Based and Traditional Defensive Strategies
2021-04-07T09:30:40Z | Ryan Poirier, ASA, CFA, FRM"Low and Minimum Volatility are widely accepted defensive strategies, while buffer strategies have arguably taken the third spot, presumably for their payoff certainty at maturity. However, the decision to allocate to one 'monthly buffer series' versus another can leave investors with uncertainty. A risk control strategy can potentially bridge the gap between these three strategies, providing a ‘best-of-both-worlds’ defensive allocation tool."
The Low-Risk Anomaly: How Much is a Good Risk Estimate Worth?
2020-11-01T22:32:23Z | Ryan Poirier, ASA, CFA, FRM“Many academics and practitioners rely on standard, relatively basic methods to estimate and manage portfolio risk. This can impact an investment manager's ability to accurately target lower volatility stocks designed to exploit the well documented low-risk anomaly. This paper finds a hybrid risk estimate that mixes short-, medium-, and long-term variances leads to superior ex-post information ratios and alphas by properly aligning securities in the correct order (low risk to high risk). This risk estimate may be worth between US$420 million and US$1.9 billion annually, calculated from the overall size (US$75 billion) of the market. The significance of this estimate survives transaction costs, various time periods, and risk factor exposures.”
Risk Before Return: Targeting Volatility with Higher Frequency Data
2020-06-10T21:11:33Z | Salt FinancialVolatility targeting is a relatively simple concept. The historical average volatility of the S&P 500 is about 18% per year. An investor looking to target a level of 10% could dynamically adjust a stock portfolio by allocating a portion to a risk-free asset like cash to reduce volatility to the targeted level.
Quarterly Beta Forecasting with Multiple Return Frequencies
2018-04-24T13:16:19Z | Salt FinancialUsing high-frequency returns can help improve responsiveness and accuracy in estimating market risk in your portfolio.