n South African Journal of Economic and Management Sciences - Aspects of volatility targeting for South African equity investors
|Article Title||Aspects of volatility targeting for South African equity investors|
|© Publisher:||University of Pretoria|
|Journal||South African Journal of Economic and Management Sciences|
|Affiliations||1 University of Pretoria and 2 University of Pretoria|
|Publication Date||Jan 2014|
|Pages||691 - 699|
|Keyword(s)||Asset allocation, B16, B26, C59, Draw-down, Equities, G19, Implied volatility, Return, Risk, VIX and Volatility|
ISI Social Science
We consider so-called volatility targeting strategies in the South African equity market. These strategies are aimed at keeping the volatility of a portfolio consisting of a risky asset, typically an equity index, and cash fixed. This is done by changing the allocation of the assets based on an indicator of the future volatility of the risky asset. We use the three month rolling implied volatility as an indicator of future volatility to influence our asset allocation. We compare investments based on different volatility targets to the performance of bonds, equities, property as well as the Absolute Return peer mean. We examine risk and return characteristics of the volatility targeting strategy as compared to different asset classes.
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