Targeting Market Neutrality and Volatility

Posted: 18 Aug 2017 Last revised: 4 May 2018

See all articles by Bao Huy Doan

Bao Huy Doan

University of New South Wales

Jonathan J. Reeves

UNSW Business School, University of New South Wales; Financial Research Network (FIRN)

Date Written: April 1, 2018

Abstract

Advances in volatility and beta forecasting are extended to the setting of volatility timing of market neutral portfolios. Key features of the study include short horizon forecasting from models with higher accuracy levels than previously documented in the literature. A trade-off in the joint targeting of portfolio beta and volatility is also identified and appropriate balancing of these two dimensions of risk is demonstrated.

Keywords: beta forecasting, short-horizon forecasting, volatility forecasting, volatility timing, zero-beta portfolios

JEL Classification: C53, G17

Suggested Citation

Doan, Bao Huy and Reeves, Jonathan J., Targeting Market Neutrality and Volatility (April 1, 2018). 30th Australasian Finance and Banking Conference 2017, Available at SSRN: https://ssrn.com/abstract=3021477 or http://dx.doi.org/10.2139/ssrn.3021477

Bao Huy Doan

University of New South Wales ( email )

Sydney, NSW 2052
Australia

Jonathan J. Reeves (Contact Author)

UNSW Business School, University of New South Wales ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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