Harvesting Volatility Generated by Naive Investors
August 22, 2014 - Animal Spirits, Volatility Effects
What is the best way to harvest asset mispricings derived from aggregate overreaction/underreaction by naive investors? In his July 2014 presentation package entitled “Betting On ‘Dumb Volatility’ with ‘Smart Beta’”, Claude Erb examines strategies for exploiting the “dumb volatility” arguably generated by naive investors who buy high and sell low, temporarily driving prices materially above and below fair values. These… Keep Reading