tag:blogger.com,1999:blog-7905515.post6864175827199362054..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Vol of Vol Eric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-7905515.post-34074670845609380962012-10-16T18:41:51.965-05:002012-10-16T18:41:51.965-05:00Link to the paper mentioned:
http://papers.ssrn.c...Link to the paper mentioned:<br /><br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2023066Emilio Lizardonoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-8674985422693739052012-10-16T17:18:40.797-05:002012-10-16T17:18:40.797-05:00Glad you enjoyed the book. The vol effect (higher ...Glad you enjoyed the book. The vol effect (higher return for low vol) goes back to 1928 if you look at the CRSP tapes. I did my dissertation on it in 1992, so I didn't have the last 22 years in that, and I documented it there. Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-9930240910198111032012-10-16T16:56:04.199-05:002012-10-16T16:56:04.199-05:00Eric,
off topic
I'm curious if you've do...Eric,<br /><br />off topic<br /><br />I'm curious if you've done any work on trying to untangle the good performance of low volatility equities and the declining real and nominal interest rates we've enjoyed over the last 30 years. Given the high correlations between low vol equities (particularly utilities) and bond returns I'm concerned that some the juice in low vol equities will evaporate when rates finally turn up. Could you point me to any work on this topic?<br /><br />By the way, I really enjoyed your book was a very readable mix of ideas that could be put in practice and insightful philosophizing about risk.<br /><br />ThanksAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-31372901459488900402012-10-16T15:03:33.241-05:002012-10-16T15:03:33.241-05:00EF,
What's so surprising or to use your words...EF,<br /><br />What's so surprising or to use your words "stand out" about this paper?<br /><br />Gee vol of vol is an indicator to returns? Really, YES VIRGINIA, THERE IS A SANTA CLAUS! Are you kidding me? This is "new" information??? Maybe to the authors but not to any decent-to-good option trader. And Def not to any very good risk manager.<br /><br />As an aside, not 6 years ago I was speaking to a desk head at a big bulge bracket firm, known then for the impeccable reputation of its prop trading group. This gent led one of the group's vol trading desks. I'd shared with him some analysis and a model I'd built to investigate price behavior in equities. When I explained why we undertook to examine kurtosis, the man looked at me over his glasses and said "are you telling me you use kurtosis as an indicator for returns?" His voice was high with indignation. I went on to briefly explain yes and why. Three months later said desk, was gone, said group was lost a cool $2B and said desk head was headless.<br /><br />He now runs risk for a 3B converts fund. And the bank's prop group is no more- and not due to Volcker rule. It always makes me laugh what passes for intelligence, not to mention numerical acumen on Wall St. All the PhDs in the world don't mean nor beget profits. That incredible sums of money are constantly chasing these pseudo-cum-professional traders is beyond humorous to me. The only thing worse than this particular breed of animal on the Street are the ivory tower set armed with cheap lab help, oodles of time and no p&l constraints who seem to think that publishing 'novel' academic papers on concepts already well mined to professional is a worthy pursuit and budget expenditure.<br /><br />Mont BlancAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-89903490503209358042012-10-16T07:43:32.344-05:002012-10-16T07:43:32.344-05:00Glad you enjoyed it. There's many mentions, ju...Glad you enjoyed it. There's many mentions, just search under US interest rates 19th century. See <br /><br />http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1596461<br /><br />http://cas.umkc.edu/econ/economics/faculty/Kregel/645/Winter2006/readings/John%20Wood.pdfEric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-5032143450242701342012-10-15T21:35:18.369-05:002012-10-15T21:35:18.369-05:00Hi Eric, In your book If i remember correctly you ...Hi Eric, In your book If i remember correctly you refer to the shape of the yield curve prior to 1930. What source did you use for the interest rate data? I have learned a great deal from your book. thank you for writing it. Anonymousnoreply@blogger.com