Volatility Effects

…evidence indicates that 3-month rolling VIX futures contracts may be the preferred way for investors to hedge stock market positions against crashes.

…evidence indicates that focusing simple moving average trading rules on stocks with relatively high past-year volatility may be profitable. However, potential optimism in assumptions about trade timing and trading frictions for high-volatility stocks suggest caution for this finding.

…evidence suggests that investors may be able to gain an edge by considering the recent historical relationship between average stock price variance and future short-term market return.

…evidence indicates that investors may be able to exploit a significantly negative idiosyncratic risk premium among German stocks, robust to a broad set of portfolio specifications and controls.

…evidence from simple tests suggest that the U.S. stock market exhibits a slight degree of systematic reversion over short intervals (one to five days), but the effect is small compared to associated return variability and therefore risky to trade.

…evidence from simple tests does not support a belief that clusters of daily volatility reliably signal poor future returns.

…investors may be able to exploit the predictability of equity return volatility via a dynamic leverage strategy that increases (decreases) leverage when predicted volatility is low (high).

…evidence suggests that investors employing hedge momentum strategies may want to adjust the level of hedging (long past winners versus short past losers) according to portfolio risk level.

…results from simple tests do not support a belief that an investor can readily filter good and bad daily stock market returns based on the level of realized volatility.

…evidence suggests that fear of disasters accounts for large fractions, perhaps most on average, of both the equity risk premium and the volatility risk premium.

…volatility traders may be able to exploit predictable behaviors of price volatility for stocks approaching and breaching 52-week highs and lows.

…evidence indicates that stock return predictions based on past volatility are sensitive to the interval of measurement. Measurement over long intervals supports the conventional reward-for-risk belief, while measurement at short intervals turns this belief upside down.

…evidence from simple tests of available data indicates that VT26 may be a good strategy for fairly high-frequency trading in some futures markets, better for short trades than long trades, with effectiveness perhaps dependent on market volatility state.

…evidence suggests that investors may be able to enhance exploitation of downside momentum by focusing on stocks with high idiosyncratic (non-beta) volatility.

…evidence suggests that investors may be able to exploit market volatility derived from forward-looking (implied volatility) measures, especially the persistent diffusion volatility component.