Manuel G. Russon
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2 publications
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737 downloads
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Minimum sum regression as the optimum robust algorithm in the computation of financial beta
Manuel G. Russon , John J. Neumann doi: http://dx.doi.org/10.21511/imfi.13(4-1).2016.09Investment Management and Financial Innovations Volume 13, 2016 Issue #4 (cont.) pp. 231-234
Views: 1033 Downloads: 166 TO CITEIn the world of finance and portfolio management, “beta” refers to the sensitivity of a security’s return, to the sensitivity of the “market” portfolio and is an indication of the level of systematic risk, i.e., the amount of risk that a company’s equity shares with the entire market. Correct values for beta are crucial for institutional portfolio managers, as the client contract almost always calls for a portfolio beta approximately equal to 1.0. Typically, beta is estimated using Ordinary Least Squares, but OLS is reliant on some very stringent assumptions. Here, betas are computed and compared using OLS and four robust regression algorithms. Minimum sum regression is identified as the superior robust regression algorithm to estimate beta.
Keywords: Financial Beta, Ordinary Least Squares, Robust Regression, Portfolio Management.
JEL Classification: C21, G11 -
On the non-linear relationship between VIX and realized SP500 volatility
Manuel G. Russon , Ahmad F. Vakil doi: http://dx.doi.org/10.21511/imfi.14(2-1).2017.05Investment Management and Financial Innovations Volume 14, 2017 Issue #2 (cont. 1) pp. 200-206
Views: 1169 Downloads: 838 TO CITE АНОТАЦІЯVIX, a ticker symbol for Volatility Index, measures the implied annual volatility of at-the-money SP500 Index Options. Conventional wisdom presumes VIX to measure the magnitude (positive or negative) of possible movements in future equity prices, with movements being a positive function of VIX. This research investigates the nature of the relationship between VIX and SP500 volatility, and answers the question as to whether that relationship is linear or nonlinear. Based on this research paper, the authors conclude that the realized SP500 volatility is nonlinear, and grows with the level of VIX at an increasing rate. The nonlinearity relationship between VIX and SP500 has enormous implications for investment management and hedging in the financial markets.