The Performance of the Volatility-Targeting Strategy : The Impact of the Volatility Forecasting Methodology and Trading Frequency on the Performance …

2021

Master's thesis in Business administration (BE501) Many researchers analyzed the performance of the volatility-targeting strategy (see, e.g., Moreira and Muir (2017) or Harvey, Hoyle, Korgaonkar, Rattray, Sargaison, and Hemert (2018)). It is a very tempting strategy as it reduces exposure to risk, especially during crises. Typically, it works pretty well on equities and gives higher Sharpe ratios and lower drawdowns. However, the latest studies (see, e.g., Zakamulin (2019), Liu, Tang, and Zhou (2019), Cederburg, O’Doherty, Wang, and Yan (2020), or Bongaerts, Kang, and van Dijk (2020)) showed some challenges in using the strategy by practitioners. This study aims to answer the questions: doe…