The Economic Value of Volatility Timing

Jones Graduate School Working Paper No. 1999.17.4

32 Pages Posted: 11 Feb 2000

See all articles by Jeff Fleming

Jeff Fleming

Rice University - Jesse H. Jones Graduate School of Business

Chris Kirby

UNC Charlotte - Belk College of Business

Barbara Ostdiek

Rice University - Jesse H. Jones Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 19, 2000

Abstract

Numerous studies report that standard volatility models have low explanatory power, leading some researchers to question whether these models have economic value. We examine this question by using conditional mean-variance analysis to assess the value of volatility timing to short-horizon investors. We find that the volatility timing strategies outperform the unconditionally efficient static portfolios that have the same target expected return and volatility. This finding is robust to estimation risk and transaction costs.

JEL Classification: G12, G14

Suggested Citation

Fleming, Jeff and Kirby, Chris and Ostdiek, Barbara, The Economic Value of Volatility Timing (January 19, 2000). Jones Graduate School Working Paper No. 1999.17.4. Available at SSRN: https://ssrn.com/abstract=205676 or http://dx.doi.org/10.2139/ssrn.205676

Jeff Fleming (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
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713-348-4677 (Phone)
713-348-5251 (Fax)

HOME PAGE: http://www.ruf.rice.edu/~jfleming

Chris Kirby

UNC Charlotte - Belk College of Business ( email )

9201 University City Boulevard
Charlotte, NC 28223
United States

Barbara Ostdiek

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
713-348-5384 (Phone)
713-348-5251 (Fax)

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