1. Anna Manoulik Sean McGreal Reid Hosford
Strategy rotation based on market volatility
Anna Manoulik  Sean McGreal Reid Hosford
February 4th, 2010

2. The Volatility Index (VIX)
Often referred to as the “investor fear gauge”, the VIX is a measure of the volatility of S&P 500 index options (SPX). This option activity implies future volatility on the S&P 500.
Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.
Information obtained from “Understanding VIX”
by: Robert E. Whaley founder of the VIX measure

3. Motivation
The Effect of Market Regimes on Style Allocation, by: Manuel Ammann and Michael Verhofen
High-Variance Regime,  value stocks deliver a good performance,
Low-Variance Regime  market portfolio and momentum stocks promise high returns.
Market Volatility and Momentum, by: Kevin Q. Wang, Jianguo Xu
High volatility  poor momentum strategy performance,

5. Description
Momentum: 12 month evaluation period and 3 month holding period
(based on “Returns to buying winners and selling losers: Implications for stock market efficiency” by: Jegadeesh and Titman)
Value stocks: Chosen based on an industry diversified basket containing top 5% of companies in terms of Book/Market