Tag Archives: volatility

Where VIX Comes From

At work, I am sometimes asked this simple but challenging question: “Where does VIX come from?”  There is a reason I am asked this – I am our company’s product manager for volatility indices.  But I admit that I have struggled to come up with an approachable way to explain the methodology of the CBOE Read more […]

Dispersion and Correlation: Which is “Better?”

We recently introduced the concept of dispersion, which measures the average difference between the return of an index and the return of each of the index’s components.  In times of high dispersion, the gap between the best performers and the worst performers is relatively wide; when dispersion is low, the performance gap narrows.  Today’s dispersion Read more […]

Index Investing Did NOT Spike Price; BRENT FELL

Maybe the verdict is still undecided for some, but it is hard to look at the evidence and still be questioning the idea that index investing drives underlying commodity prices.   Now that the commodity index rebalance is over and the shift between WTI and Brent is behind, we can examine the impact.  As I Read more […]

Getting Grim For Gold Miners?

If you are worried that gold prices are falling, the prognosis could be much worse for gold miner stocks. Although many investors believe the performance of gold miners is just like the performance of gold, this is not quite the case.  If investors look at correlations alone to determine they are getting their gold exposure Read more […]

Looking Back To Look Ahead

In terms of fixed-income investing, 2013 is a year for the history books. Consequently, the question of what will 2014 bring for the fixed income investor arises. Some significant understanding of future fixed-income investing can be inferred from the recent past. The equity market had a very successful 2013 as the S&P 500 Index returned Read more […]

Two Dimensions of Risk

Investors have long regarded the market’s overall level of volatility as an indication of its riskiness.  The S&P 500 VIX Index, in particular, is often referred to as a “fear gauge” for U.S. equities since it tends to rise when investors are nervous and to fall when the markets are quiescent. Although S&P 500 VIX Read more […]

Taking Risk and Making Money

My colleagues, Daniel Ung and Xiaowei Kang, recently published an article on alternative commodity strategies. Below is an intro and some highlights: “Ever since the publication of Professor Harry Markowitz’s work in 1952, modern portfolio theory has been one of the cornerstones of asset allocation and portfolio construction. Until recently, the principal building blocks used to Read more […]

Volquakes

Volatility can feel like an earthquake. As many investors can painfully testify, the chart below is typical of volatility.  A period of relative calm is disturbed first by a few small tremors, then by a precipitous rise.  At this point, risk breaks all connections with its normal level and climbs rapidly to a crystalized zenith Read more […]

Strong as Steel: Impacts of New Futures

This morning I was interviewed for CCTV2 on the impact of new futures markets with a focus on iron ore. Although Iron ore is not in the major indices, the DJ-UBS and S&P GSCI, it is an economically significant commodity that is the main input for steel. I thought you might be interested in the Read more […]

How Much Popularity Can Low Volatility Stand?

The low volatility anomaly — i.e., the tendency for low-volatility or low-beta portfolios to outperform market averages — has been the subject of at least 40 years of academic research.  Given its challenge to what “everyone knows” about risk and return, it’s a fertile field for both professors and practitioners, some of whom recently characterized Read more […]