51
votes
At what point do index funds become unreliable?
A great deal of analysis on this question relies on misunderstandings of the market or noticing trends that happened at the same time but were not caused by each other. Without knowing your view, I'...
- 15.1k
30
votes
Accepted
Why would long-term investor care about volatility?
If you really do not need to withdraw the money, it is just for psychological reasons. Excessive volatility makes many people uneasy and probably rightfully so given the amount of money involved after ...
- 7,422
22
votes
Accepted
What is the real return of a portfolio? Markowitz vs "real" return
Analysis in the Markowitz model is intended to be done over a single investment period (source). Here you've stretched it out to 5 annual periods, so you're outside the bounds of the model.
The ...
- 740
14
votes
At what point do index funds become unreliable?
The argument you are making here is similar to the problem I have with the stronger forms of the efficient market hypothesis. That is if the market already has incorporated all of the information ...
- 3,719
14
votes
Why isn't "everyone" short VXX?
Here's a PSA, and a short answer.
PSA: Please don't trade things that you don't understand. That's rule #1. Not that you're doing that. You're trying to educate yourself, I can see that clearly. ...
- 1,259
12
votes
Why does a call option's price increase with higher volatility?
I agree that high volatility just means the underlying stock price fluctuates more, and it does not imply if the stock is going up or down.
But a high volatility in the price of an underlying also ...
- 221
11
votes
At what point do index funds become unreliable?
As more actively managed funds are driven out of the market, the pricing of individual stocks should become less rational. I.e. more stocks will become underpriced relative to their peers. As stock ...
- 2,992
10
votes
Accepted
Why do volatility stocks/ETFs (TVIX, VXX, UVXY) trend down in the long-term?
In an attempt to express this complicated fact in lay terms I shall focus exclusively on the most influential factor effecting the seemingly bizarre outcome you have noted, where the price chart of ...
- 6,400
10
votes
What happens to all of the options when they expire?
Options that are not worth exercising just expire. Options that are worth exercising are typically exercised automatically as they expire, resulting in a transfer of stock between the entity that ...
- 10.3k
8
votes
Accepted
What are some signs that the stock market might crash?
Although it is impossible to predict the next stock market crash, what
are some signs or measures that indicate the economy is unstable?
These questions are really two sides of the same coin. As ...
- 717
7
votes
At what point do index funds become unreliable?
private investors that don't have the time or expertise for active investment.
This may be known as every private investor. An index fund ensures average returns. The bulk of active trading is done ...
- 2,680
7
votes
Accepted
What possible reasons are behind the GBP -> EUR rate being the same for a few days?
Forex markets are closed on weekends, so the prices are stale.
- 29.4k
6
votes
Accepted
Accepting high volatility for high long-term returns
This is basically what financial advisers have been saying for years...that you should invest in higher risk securities when you are young and lower risk securities when you get older.
However, ...
- 15.1k
6
votes
Accepted
Volatility indicator
Beta is the measure of volatility and typically available on most stock and often mutual funds information pages.
For a full explanation of Beta
The chart for FB on yahoo finance:
- 76.1k
6
votes
Why isn't "everyone" short VXX?
why isn't 'everyone' short VXX?
Shorts can be forcibly closed by the lender under certain conditions. Given this, then if VXX spikes upwards, you could get wrecked. So even if you are 100% sure that ...
- 559
6
votes
Why can’t I short Game Stop right now?
I can't know why your brokerage, specifically, disabled shorting, but the reason seems very obvious to me, like common sense.
Nobody knows how high the stock will go, especially not you. A month ago ...
- 2,620
5
votes
Why does a call option's price increase with higher volatility?
When volatility is higher, the option is more likely to end up in-the-money. Moreover, when it ends up in-the-money, it is likely to be over the strike price by a greater amount. Consider a call ...
5
votes
Accepted
VIX and XIV moved in same direction?
For the sake of readers not familiar with these instruments, let's first consider some elementary background information.
The CBOE VIX index is a spot index which is not tradeable. Gaining exposure ...
- 6,400
5
votes
How is options implied volatility for a stock determined?
There are a few different "kinds" of implied volatility. They are all based on the IVs obtained from the option pricing model you use.
(1) Basically, given a few different values (current ...
- 337
5
votes
Accepted
What does "half weighted" mean in this context?
US Dollar Index consists of:
Euro (EUR), 57.6% weight
Japanese yen (JPY), 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss ...
- 10.2k
5
votes
How do I calculate drift from a series of stock prices?
Here is a minimal example based on 16 months of returns. The calculation can be found in the textbook Computational Financial Mathematics using Mathematica, page 54.
For daily returns adjust the ...
- 9,677
5
votes
Volatility indicator
To calculate it yourself you need to calculate the standard deviation (or variance but that is just the standard deviation squared) of the returns. Unfortunately the returns on stocks are distributed ...
- 8,801
5
votes
Hedge against crypto currency / exchange risk
The sort of "hedging" you have heard about on business TV simply doesn't apply to such bizarre/thin/unusual markets; and it only applies when large wholesale amounts of the item in question is in play....
- 13.8k
5
votes
Rapids (RPD) cryptocurrency: 3190500% increase in 1 hour
How is it possible for a cryptocurrency to have a $398bn increase in market capitalization with only a volume of $480k?
It is possible. To illustrate:
Imagine a cryptocurrency with 1 million coins ...
- 16.9k
4
votes
What indicators should I look for when investing in various stocks or funds?
Rather new here - I dabble mainly on the Quant/Math forums. The simple answer is that indicators (Sharpe, volatility, ect. are probably better classified as statistics) are mostly useless - past ...
- 355
4
votes
why do energy stocks trade at lower prices compared to other sectors?
Large-scale price range of a stock isn't directly meaningful; that reflects how many shares exist, not just how desirable they are. A stock split, for example, doubles the number of shares everyone ...
- 42.9k
4
votes
What happens to all of the options when they expire?
Firstly "Most option traders don't want to actually buy or sell the underlying stock."
THIS IS COMPLETELY UTTERLY FALSE
Perhaps the problem is that you are only familiar with the BUY side of options ...
- 1,058
4
votes
Accepted
How to deal with activist targeting of individual stocks?
The easiest way to deal with risks for individual stocks is to diversify. I do most of my investing in broad market index funds, particularly the S&P 500.
I don't generally hold individual ...
- 32.7k
4
votes
At what point do index funds become unreliable?
Private investors as mutual funds are a minority of the market. Institutional investors make up a substantial portion of the long term holdings. These include pension funds, insurance companies, and ...
- 21k
Only top scored, non community-wiki answers of a minimum length are eligible