The Effectiveness Of Risk Timing Strategies Based On Different Risk Measures

The Volatility Timing(VT)proposed by Chris Kirby and Barbara Ostdiek only considers the volatility of assets,i.e.the overall risk.However,many scholars have proposed different indicators for measuring the risk,and these risk indicators do not move synchronously.Therefore,we use tail risk and idiosyncratic volatility instead of volatility.Va R-Timing(Va RT),CVa R-Timing(CVa RT),LPM＿Timing(LPMT)and IVOL-Timing(IVOLT)strategies are constructed.Using ten industry indices of HS300 as risky assets in the investment universe,this thesis makes an empirical study,and compares the performance with that of VT portfolio,equal weight(EW)portfolio,minimum-variance(MV)portfolio and maximum-diversification(MD)portfolio,and uses 10 indicators including conventional performance indicators and unconventional performance indicators to evaluate the out-of-sample performance of each portfolio,so as to help investors better understand the advantages and disadvantages of each portfolio and make reasonable decisions.When empirical using monthly yield data,the results show that when η=(2,3,4,5),the expected excess return and Sharpe ratio of VT portfolio,Va RT portfolio and CVa RT portfolio are significantly better than those of EW,MV and MD,and the Va RT portfolio and CVa RT portfolio can bring expected excess return and Sharpe ratio while keeping the same volatility,turnover and capital/risk diversification as VT portfolio.By analyzing the values of UPR,DPR and PRD,it is further proved that Va RT and CVa RT can improve their upside profitability while maintaining the downside risk control similar to that of VT,because Va R and CVa R can separate the bad downside risk from the good upside gains,control the risk without suppressing the gains,and the off-sample performance of Va RT and CVa RT is still excellent by changing the confidence and off-sample interval.When the daily yield data is used for empirical analysis,the LPMT portfolio has better off-sample performance,not only its yield and sharp ratio are significantly better than other portfolios,but also its capital diversification and risk diversification are significantly better than those of the VT portfolio.No matter what frequency of data is used,the IVOLT strategy performs poorly on off-sample performance,with low yield,high volatility,high risk of retracement,low degree of capital diversification and risk diversification.