Any excess volatility in the market could provide an even better opportunity.
Not exact matches
«When I purchased long - term zero - coupon bonds
in the early 1980's at
market yields
in excess of 13 %, I welcomed the prospect of outsized
volatility because I felt it would eventually work
in my favour.»
While base rates kept at or close to zero for almost seven years and three massive asset - buying programs by the Fed have undoubtedly helped stabilize the US (and world) economy during and after the recession that followed the global financial crisis, the continuation of expansionary monetary policies is now supporting a growing
excess of global liquidity that has been distorting the
market signals sent by stock and bond prices and thus contributing to the growing
volatility seen
in recent weeks.
This highly flawed concept, widely taught
in MBA and financial engineering programs, perceives
volatility as an exogenous measurement of risk, ignoring its role as both a source of
excess returns, and a direct influencer on risk itself... Systematic strategies are based on
market volatility as a key decision metric for leverage... The majority of active management strategies rely on some form of
volatility for
excess returns and to make leverage decisions.
This type of trading usually involves negating the some of the Beta (
volatility)
in the
markets while isolating the Alpha, which is the return
in excess of the compensation for the risk taken.
They focus on net fund alphas, meaning after - fee returns
in excess of the risk - free rate, adjusted for exposures to three kinds of risk factors well known at the start of the sample period: (1) traditional equity
market, bond
market and credit factors; (2) dynamic stock size, stock value, stock momentum and currency carry factors; and, (3) a
volatility factor specified as monthly returns from buying one - month, at ‐ the ‐ money S&P 500 Index calls and puts and holding to expiration.
Figure 2, Panel A, plots the historical
excess return and historical
volatility, and Panel B the five - year expected return and expected
volatility, at year - end 2016 for a number of common factors
in the US
market, constructed as long — short portfolios.
Long - term simulations
in U.S., global developed, and emerging
markets confirm that low -
volatility strategies can potentially access risk - diversifying sources of
excess return.
For me, the cash value of life insurance becomes a buffer against
excess volatility and down - side risk
in the stock
market and a way to transfer wealth to my children / grand children tax free.