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The Economic Value of Volatility Timing

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  • Jeff Fleming
  • Chris Kirby
  • Barbara Ostdiek

Abstract

Numerous studies report that standard volatility models have low explanatory power, leading some researchers to question whether these models have economic value. We examine this question by using conditional meanm‐variance analysis to assess the value of volatility timing to short‐horizon investors. We find that the volatility timing strategies outperform the unconditionally efficient static portfolios that have the same target expected return and volatility. This finding is robust to estimation risk and transaction costs.

Suggested Citation

  • Jeff Fleming & Chris Kirby & Barbara Ostdiek, 2001. "The Economic Value of Volatility Timing," Journal of Finance, American Finance Association, vol. 56(1), pages 329-352, February.
    • Handle: RePEc:bla:jfinan:v:56:y:2001:i:1:p:329-352
    DOI: 10.1111/0022-1082.00327
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