{"id":40890373,"date":"2023-08-31T18:12:18","date_gmt":"2023-08-31T12:42:18","guid":{"rendered":"https:\/\/stockviz.biz\/index.php\/?p=40890373"},"modified":"2023-08-31T18:12:19","modified_gmt":"2023-08-31T12:42:19","slug":"volatility-lookbacks","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2023\/08\/31\/volatility-lookbacks\/","title":{"rendered":"Volatility Lookbacks"},"content":{"rendered":"\n<p>Volatility is calculated over a time period &#8211; the lookback. While developing a strategy, it is typical to try a range of lookbacks and pick one that looks reasonable for the strategy being built. However, is there an &#8220;ideal&#8221; lookback period?<\/p>\n\n\n\n<p>This is where a <a rel=\"noreferrer noopener\" href=\"https:\/\/www.researchgate.net\/figure\/Volatility-signature-plot-Average-realized-volatility-at-each-sampling-period_fig2_259478159\" target=\"_blank\">volatility signature plot<\/a> comes into the picture. It is typically used in high frequency trading but there is no reason not to use it on a lower frequency time series. <\/p>\n\n\n\n<p>If you plot the distribution of volatility over different lookbacks, this is how it looks:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/github.com\/stockviz\/blog\/blob\/master\/volatility\/signature\/volatility-signature.png?raw=true\" alt=\"\" \/><\/figure>\n\n\n\n<p>Ideally, you want the box to be small, the median in the middle and the wicks to be short. After all, if you are using volatility to drive a strategy, if the distribution of volatility itself is too wonky, then how do you trust the output?<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Volatility is calculated over a time period &#8211; the lookback. While developing a strategy, it is typical to try a range of lookbacks and pick one that looks reasonable for the strategy being built. However, is there an &#8220;ideal&#8221; lookback period? This is where a volatility signature plot comes into the picture. It is typically &hellip; <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3471],"tags":[2761,1150],"class_list":["post-40890373","post","type-post","status-publish","format-standard","hentry","category-investing-insight","tag-quant","tag-volatility","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890373","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=40890373"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/40890373\/revisions"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=40890373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=40890373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=40890373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}