Author: shyam

Volatility

Introduction

Historical volatility and implied volatility.
Read: Part I, Part II

Nifty volatility

Density plots of historical volatility over different horizons.
Read: Large Moves Happen Together, NIFTY Volatility, Historical Perspective
Charts that are updated often: Volatility and VIX Charts

Dollar ETF volatilities

When you convert Indian indices to dollars, their volatility profile changes.
Read: INDA vs. SPY Observed Volatility

VIX – Implied Volatility Index

Do VIX indices across markets have any relationship with each other?
Read: India VIX vs. SPX VIX

Can a simple VIX based trading strategy avoid market losses?
Read: Macro Volatility and the NIFTY 50, VIX and Equity Index Returns, Part I, Part II.

Can VIX be predicted using a simple model?
ARMA + GARCH to Predict VIX

Book Review: A First-Class Catastrophe

A First-Class Catastrophe (Amazon,) is about Black Monday – October 19, 1987 – the worst day in Wall Street history when the market fell 22.6%. The author, Diana B. Henriques, presents a thoroughly researched, yet revetting account of why it happened, the key players and why it will happen again.

The actual lesson is that human beings do not cope well in a crisis when speed, complexity, secrecy, and fear all batter our emotions at the same time. We panic — or, most of us do. We are not the cool, rational investors postulated in academic theories, and we never will be.

The problem is that US regulators continue to approach the markets in a piecemeal manner that make wholesome regulations impossible to achieve. As long as they are more focused on protecting their turf, the markets are stuck in a doom loop.

Recommendation: Worth a read.

Asset Allocation

Introduction

How does an equity/bond 2-asset portfolio look like?
Read: Allocating a Two-Asset Portfolio

A three asset portfolio

Indian midcaps + bonds with Nasdaq-100 ETF. Is there a benefit to using portfolio optimization algorithms after taxes and transaction costs are taken into account?
Read: Allocating a Three-Asset Portfolio, Equal Weighted and Allocating a Three-Asset Portfolio, Optimized

Adding gold into the mix

Does gold have a role to play in a systematic, diversified portfolio?
Read: Allocating a Four-Asset Portfolio

Investing in a systematic, diversified portfolio

A ready-to-invest Theme, the EQUAL-III, that takes care of keeping track of everything.
Read: The EQUAL-III Theme

Expected Returns

What are the range of expected SIP returns under prudent asset allocation schemes?
Read: SIP: Expected Returns

Lumpsum or SIP?

Introduction

What are the return profiles of dollar cost averaging (DCA or SIP) vs. one-time (lumpsum) investing?
Read: Lumpsum vs. Dollar Cost Averaging (SIP)

Thinking in probabilities

If you model the returns, how do returns and losses look across lumpsum and SIP investing?
Read: Lumpsum vs. SIP: Thinking in Probabilities

It all depends on when you start and stop

Shuffling returns to generate alternate universes.
Read: The Path Dependency of SIP Returns