The Economic Value of Volatility Timing
Posted: 18 Feb 2000
There are 2 versions of this paper
The Economic Value of Volatility Timing
Jones Graduate School Working Paper No. 1999.17.4
Number of pages: 32
Posted: 11 Feb 2000
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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: Suggested Citation
Fleming, Jeff and Kirby, Chris and Ostdiek, Barbara, The Economic Value of Volatility Timing. Available at SSRN: https://ssrn.com/abstract=205890
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