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Activity Number: 448 - The Essential Role of Statistics in Modeling Complex Data in Business and Economics
Type: Invited
Date/Time: Wednesday, August 2, 2017 : 8:30 AM to 10:20 AM
Sponsor: Section on Statistics in Marketing
Abstract #324679
Title: Betting on Low Volatility
Author(s): Zhaogang Song* and Lai Xu and Nicola Fusari
Companies: Johns Hopkins University and Syracuse Univeristy and Johns Hopkins University
Keywords: Volatility ; Tail Risk ; VIX Option

We provide strong empirical evidence for a negative premium to betting on low volatility. A downward volatility tail measure we develop through VIX options significantly predicts market returns with a negative sign. A portfolio that takes less exposure to market risk when downward volatility tail is higher improves the sharp ratio significantly.

Authors who are presenting talks have a * after their name.

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