Daily Archives: February 9, 2011

THE DOUBLE-EDGED SWORD OF “INVESTING” IN VOLATILITY

A new research paper casts some doubt on using volatility as an asset class. The warning isn’t unexpected, given that the broad themes of the paper’s findings have been discussed for years. Nonetheless, “The Hazards of Volatility Diversification Volatility” (by Carol Alexander and Dimitris Korovilas at the University of Reading) is a timely reminder that owning (or shorting) volatility directly can be a complicated affair.

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