USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/29/16)

/
USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/29/16)

To see the origin of this series click here

In the paper that inspired this series "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?" the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name equities. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively for 4 weeks before rotating out of that portfolio.

Read More

COMPOSITE MACRO ETF WEEKLY ANALYTICS (3/19/2016)

/
COMPOSITE MACRO ETF WEEKLY ANALYTICS (3/19/2016)

Notable Observations and Trends:

  • Last 252 days the only Composites with positive returns are the "defensive" sectors: Utilities, Consumer Staples, Telecom, Precious Metals, and Treasuries
  • Last 252 days all Composites have negative rolling risk adjusted returns as shown in the Scatterplot.
  • There are still concerns that Energy and Oil + Gas showing strong performance over the last 10 and 21 days is simply short covering and momentum traders. Fundamentally that question will be answered by tracking Oil inventories vs production. 
  • Are the AsiaPacific and Emerging/Frontier composites finally being repriced to the upside or are we simply in a "risk-on" environment where high beta is being purchased indiscriminately? This is something to pay attention to as the Implied Cost of Capital estimates show these two composites have the highest implied returns (most undervalued) over the next year. 
Read More

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/19/16)

/

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE

To see the origin of this series click here

In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name equities. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively for 4 weeks before rotating out of that portfolio. The ETF's are selected from the following groups:

PORTFOLIO EIGHT:

LONGS:  IYG, XLP, EWW, EPI, MDY, XLU, IYR, IAU

SHORTS: HEDJ, INDA, IWB, VXUS, EWS, EZU, EWU, LQD

PORTFOLIO NINE:

LONGS:  HACK, EWW, XLV, XLY, XLB, ECH, IVV, IYE, XLP

SHORTS: KRE, VO, XHB, VXUS, HEDJ, XRT, FEZ, BND

PORTFOLIO TEN:

LONGS: IYZ, HACK, MOO, HEDJ, XLY, TLT, IYT, FEZ, XLV

SHORTS: LIT, RWO, VO, IXC, ECH, RWX, BIL, EWI, KIE

PORTFOLIO ELEVEN:

LONGS: IYZ, GLD, TLT, EWL, SHY, FDN, ECH, RWR, IEF

SHORTS: VO, RWO, IXP, IYJ, FXG, FEZ, KIE, INDA, AAXJ

PORTFOLIO TWELVE:

LONGS: XHB, IBB, XLI, XLU, IYR, SIL, XLE, GLD, IEF

SHORTS: AAXJ, VWO, IXC, EWW, VIS, VDE, FXD, HEDJ, DGT

CUMULATIVE GROSS PRICE RETURN (ALL PORTFOLIOS)

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/14/16)

/

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE

To see the origin of this series click here

In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name equities. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively for 4 weeks before rotating out of that portfolio. The ETF's are selected from the following groups:

PORTFOLIO SEVEN:

LONGS: RTH, FDN, IDU, EPI, HACK, XLU, IYG, HEDJ

SHORTS: EWA, MOO, VOX, VGK, EWH, EWW, IAU, IJR

PORTFOLIO EIGHT:

LONGS:  IYG, XLP, EWW, EPI, MDY, XLU, IYR, IAU

SHORTS: HEDJ, INDA, IWB, VXUS, EWS, EZU, EWU, LQD

PORTFOLIO NINE:

LONGS:  HACK, EWW, XLV, XLY, XLB, ECH, IVV, IYE, XLP

SHORTS: KRE, VO, XHB, VXUS, HEDJ, XRT, FEZ, BND

PORTFOLIO TEN:

LONGS: IYZ, HACK, MOO, HEDJ, XLY, TLT, IYT, FEZ, XLV

SHORTS: LIT, RWO, VO, IXC, ECH, RWX, BIL, EWI, KIE

CUMULATIVE GROSS PRICE RETURN (ALL PORTFOLIOS)

PORTFOLIO ELEVEN:

LONGS: IYZ, GLD, TLT, EWL, SHY, FDN, ECH, RWR, IEF

SHORTS: VO, RWO, IXP, IYJ, FXG, FEZ, KIE, INDA, AAXJ

USING IMPLIED VOLATILITY TO PREDICT ETF RETURNS (3/05/16)

/

FOR A DEEPER DIVE INTO ETF PERFORMANCE AND RELATIVE VALUE SUBSCRIBE TO THE ETF INTERNAL ANALYTICS PACKAGE HERE

To see the origin of this series click here

In the paper that inspired this series ("What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns?") the authors' research shows that their calculation of the Option Volatility Smirk is predictive of equity returns up to 4 weeks. Therefore, each week, I will calculate the Long/Short legs of a portfolio constructed by following their criteria as closely as possible. However this study will focus on ETF's as opposed to single name equities. I will then track the results of the Long/Short portfolio, in equity returns, cumulatively for 4 weeks before rotating out of that portfolio. The ETF's are selected from the following groups:

PORTFOLIO SIX:

LONGS: IJR, ACWI, IJH, KBE, VWO, XLY, XLU, IYG

SHORTS: EWU, XHB, VXUS, VPU, IXC, EWW, VGK, EPI

PORTFOLIO SEVEN:

LONGS: RTH, FDN, IDU, EPI, HACK, XLU, IYG, HEDJ

SHORTS: EWA, MOO, VOX, VGK, EWH, EWW, IAU, IJR

PORTFOLIO EIGHT:

LONGS:  IYG, XLP, EWW, EPI, MDY, XLU, IYR, IAU

SHORTS: HEDJ, INDA, IWB, VXUS, EWS, EZU, EWU, LQD

PORTFOLIO NINE:

LONGS:  HACK, EWW, XLV, XLY, XLB, ECH, IVV, IYE, XLP

SHORTS: KRE, VO, XHB, VXUS, HEDJ, XRT, FEZ, BND

CUMULATIVE GROSS PRICE RETURN (ALL PORTFOLIOS)

PORTFOLIO TEN:

LONGS: IYZ, HACK, MOO, HEDJ, XLY, TLT, IYT, FEZ, XLV

SHORTS: LIT, RWO, VO, IXC, ECH, RWX, BIL, EWI, KIE