24/04/2019

Mean reversion in equity markets

Share on linkedin
Chalk logo

In Short

It is widely held in the equity market that the variance ratio decreases with a holding period (i.e. longer holding periods equals lower realised variance).

The variance ratio is defined as the annualised volatility measured over a X-day holding period divided by the annualised volatility measured on a daily basis. This has implications for investors seeking to extract the volatility risk premium (holding short volatility positions) in that hedging should be carried out on a less frequent basis to take advantage of this feature, whilst those with long positions should hedge daily to maximise returns.

To access this White Paper, please fill in the form to be reviewed by our team.

Your privacy

Cookies are data files that are stored on your computer or other smart device by a website’s server. Each cookie is unique to your web browser. It will contain some anonymous information such as a unique identifier, website’s domain name, and some digits and numbers. Cookies are useful as they allow us to recognise a user’s device and its preferences in order to ensure that our website works properly. By continuing to use this website, you consent to the use of our cookies.

 

You can find out the different types of cookies used on our website in our Cookies and Data Privacy Policies.

Necessary cookies