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Primary Article

A Portfolio of Stocks and Volatility

Robert T. Daigler and Laura Rossi
The Journal of Investing Summer 2006, 15 (2) 99-106; DOI: https://doi.org/10.3905/joi.2006.635636
Robert T. Daigler
A professor of finance at Florida International University in Miami, FL.
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  • For correspondence: daiglerr@fiu.edu
Laura Rossi
A senior risk analyst at Commercebank in Coral Gables, FL.
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  • For correspondence: laurajaramillo@hotmail.com
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Abstract

Purchasing volatility to add to a S&P 500 stock portfolio substantially reduces risk without having much effect on return. This article examines the risk and return properties of the VIX, S&P 500 stock portfolio, and a Markowitz combination of these assets, showing the risk-return benefits of including volatility as an asset. Since the daily correlation between the S&P and VIX assets ranges from –.45 to –.82, there are significant benefits to adding volatility to a portfolio of stocks. Purchasing volatility is now possible via exchange traded futures contracts or over-the-counter instruments.

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The Journal of Investing
Vol. 15, Issue 2
Summer 2006
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A Portfolio of Stocks and Volatility
Robert T. Daigler, Laura Rossi
The Journal of Investing May 2006, 15 (2) 99-106; DOI: 10.3905/joi.2006.635636

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A Portfolio of Stocks and Volatility
Robert T. Daigler, Laura Rossi
The Journal of Investing May 2006, 15 (2) 99-106; DOI: 10.3905/joi.2006.635636
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Show more Primary Article
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