Accurately Forecasting Multi-period Stock Market Returns

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I recently posted a paper, “Transforming Stock Market Forecasts with Variable Expected Returns,” on the SSRN online repository.  This paper resolves an issue that has been bugging me for years. The link is: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=495384 This paper is not about making money, but rather about a fundamental theoretical error regarding stock market forecasts that has been present for many years.  The flawed methodology generates overoptimistic multi-period …

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How does Volatility Shares’ ETHU Work?

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On June 4th, 2024, Volatility Shares introduced ETHU, an Exchange Traded Fund (ETF) offering 2X leverage on the daily percentage moves of the ether cryptocurrency. This post will review ETHU’s architecture, operational characteristics, likely risks, possible rewards, and potential trading strategies.  A simulation of ETHU back to 2017 provides some insight on how this Exchange Traded Fund (ETF) might perform in the future. Before we …

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How Does BITX, Volatility Shares’ 2X Leveraged Bitcoin Strategy Fund Work?

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On June 27th,2023 Volatility Shares introduced BITX, the first 2X leveraged Bitcoin Exchange Traded Fund.  This post will review BITX’s architecture, operational characteristics, likely risks, possible rewards, and potential trading strategies.  A simulation of BITX back to 2014 provides some data on how this Exchange Traded Fund (ETF) might perform in the future. Before we get into the specifics of how BITX works, I’m disclosing …

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How Volatility ETPs Really Work TL;DR

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The short-term Volatility ETPs hold a mix of the two nearest-to-expiration VIX futures. The ETPs are either long both of those (e.g., VXX, UVXY, UVIX, VIXY) or short both of those (SVIX, SVXY).  If the VIX futures term structure is in contango, with prices increasing with time, then the tendency will be for both futures to drop in value on a daily basis–so a long ETP …

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How Does the Cboe’s VIX1D Work?

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The Cboe is just dribbling out information so far (30-April-2023), on the new one Day VIX (VIX1D), but so far the evidence supports the following guesses: So far, the Cboe has released 1 year of backtest data for the VIX1D (VIX1D dashboard), but even that little snippet of data confirms that this extension to the VIX family will expand its general ability to confuse people. …

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