Bodies of research have been dedicated to the art of timing investments, and put simply: while not impossible, it is difficult. Despite the empirical evidence on the level of difficulty, the potential rewards for timing by investors are real.
In this whitepaper, Hamish Seegopaul, Global Head of Index Product Innovation at STOXX, introduces a new metric — the tail-implied volatility (TIV) spread — to complement volatility, and help investors compare investments from the standpoint of timing risk.
The TIV spread seeks to capture the difference between an asset’s theoretical historical volatility — based on what the best one-day returns per calendar year imply — and actual realized volatility. “In other words,” writes Hamish, “we aim to capture the difference between expectations and reality.”
Explore the findings by downloading the report.
