Anna Manoulik Sean McGreal Reid Hosford - PowerPoint PPT Presentation

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  1. Anna ManoulikSean McGrealReid Hosford Strategy rotation based on market volatility February 4th, 2010

  2. The Volatility Index (VIX) • Often referred to as the “investor fear gauge”, the VIX is a measure of the volatility of S&P 500 index options (SPX). This option activity implies future volatility on the S&P 500. • Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility. • Information obtained from “Understanding VIX” by: Robert E. Whaley founder of the VIX measure

  3. Motivation • The Effect of Market Regimes on Style Allocation, by:Manuel Ammann and Michael Verhofen High-Variance Regime,  value stocks deliver a good performance, Low-Variance Regime market portfolio and momentum stocks promise high returns. • Market Volatility and Momentum,by:Kevin Q. Wang, JianguoXu High volatility  poor momentum strategy performance,

  4. Description Momentum: 12 month evaluation period and 3 month holding period (based on “Returns to buying winners and selling losers: Implications for stock market efficiency” by: Jegadeesh and Titman) Value stocks: Chosen based on an industry diversified basket containing top 5% of companies in terms of Book/Market