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Risk and Uncertainty in Style Rotation
Keywords: 5 words maximum
ETF, Volatility, Uncertainty, Style Selection, Value vs. Growth
Very short description for use in the program to help attendees understand more than a title can describe
This paper examines the interaction of ETF returns, volatility, and uncertainty. The VIX index is used as a proxy for risk while the VVIX index (the "volalitility of volatility" index) proxies for uncertainty. The VVIX index provides significant incremental information regarding the interaction of returns, volatility, and uncertainty. Based on initial empirical results, short-term uncertainty leads to positive short-term returns to value. As this uncertainty is resolved in the marketplace over a period of about twenty days, however, its effect becomes negative while risk becomes the main driver of positive returns to value.
Lead & Corresponding Author
Timothy A. Krause, Ph.D., Penn State Erie - The Behrend College
Job Title
Assistant Professor