{"id":2104363,"date":"2019-04-26T14:24:37","date_gmt":"2019-04-26T08:54:37","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=2104363"},"modified":"2019-04-26T14:24:37","modified_gmt":"2019-04-26T08:54:37","slug":"volatility-and-returns","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2019\/04\/26\/volatility-and-returns\/","title":{"rendered":"Volatility and Returns"},"content":{"rendered":"

Indian mid-caps, represented by the NIFTY MIDCAP 100 TR index, has out-performed its large-cap peer, the NIFTY 50 TR index.
\n\"NIFTY<\/a><\/p>\n

It has done so with higher volatility. Here is the rolling 200-week standard deviation of weekly returns of the two indices:
\n\"standard<\/a><\/p>\n

MIDCAP volatility has been persistently higher than NIFTY volatility in the past:
\n\"ratio<\/a><\/p>\n

A portfolio of bonds and mid-caps should exhibit lower volatility than an all-equity portfolio. Here are the standard-deviation ratios for different allocations to bonds:
\n\"standard<\/a>
\nB05, for example, represents a portfolio of 5% short-term bonds and 95% MIDCAP index. As allocation to bonds increases, portfolio volatility decreases.<\/p>\n

We see from the chart above that a 75% MIDCAP + 25% BOND portfolio has almost never seen volatility greater than an all NIFTY portfolio. So, what are we giving up in returns to reduce volatility? About 2% in returns:<\/p>\n

\"75%<\/a><\/p>\n

Take-away<\/h3>\n
    \n
  1. On an annualized basis, the allocation portfolio gives up about 2% in returns compared to all MIDCAP portfolio and is on par with NIFTY’s.<\/li>\n
  2. After taxes and transaction costs, expect the allocation portfolio to under-perform buy-and-hold NIFTY.<\/li>\n
  3. No pain. No gain.<\/li>\n<\/ol>\n

    Code and charts are on github<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Indian mid-caps, represented by the NIFTY MIDCAP 100 TR index, has out-performed its large-cap peer, the NIFTY 50 TR index. It has done so with higher volatility. Here is the rolling 200-week standard deviation of weekly returns of the two indices: MIDCAP volatility has been persistently higher than NIFTY volatility in the past: A portfolio … <\/p>\n","protected":false},"author":2,"featured_media":2091813,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[960,1150],"class_list":["post-2104363","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing-insight","tag-returns","tag-volatility","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2104363","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=2104363"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/2104363\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media\/2091813"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=2104363"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=2104363"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=2104363"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}