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Target Volatility: Are There Benefits for Domestic and International Investors?

44 Pages Posted: 1 Jun 2017  

Claus Huber

Rodex Risk Advisers LLC

Date Written: May 31, 2017

Abstract

This paper compares quarterly rebalanced equity/bond portfolios with 2 different target volatility approaches and a stress allocation model that switches between a normal and a stress allocation during times of high volatility. The analysis comprises the 5 countries Germany, Japan, US, UK and Switzerland and takes the perspectives of purely domestic as well as international investors. Generally, target volatility strategies enhance performance metrics irrespective of investors’ domestic or international orientation. The results developed in this paper can have important implications for, for example, life-cycle products, pension funds and their regulators as well as robo-advisors that utilise target volatility to express investors’ risk attitudes.

Keywords: International diversification, Optimization, Rebalancing, Risk budget, Target volatility, Volatility information

JEL Classification: G11, G15, G32, C58

Suggested Citation

Huber, Claus, Target Volatility: Are There Benefits for Domestic and International Investors? (May 31, 2017). Available at SSRN: https://ssrn.com/abstract=2977841 or http://dx.doi.org/10.2139/ssrn.2977841

Claus Huber (Contact Author)

Rodex Risk Advisers LLC ( email )

Breitenstrasse 15
Altendorf SZ, Schwyz 8852
Switzerland
41435397622 (Phone)

HOME PAGE: http://www.rodexrisk.com

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