SmileSlope · Optionrisk · Yan (2011)
Put volatility minus call volatility
Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1996Q2 to 2022Q4.
Expected return · posterior mean, % per quarter
Next quarter
3.12%
95% interval 2.30% to 3.86%
Next year
2.92%
95% interval 2.15% to 3.69%
Next five years
2.33%
95% interval 1.22% to 3.35%
Cumulative market-adjusted return
+3,268% since 1996Q2 · log scale
Past performance, annualized
| Window | Mean | Vol. | Sharpe | t |
|---|---|---|---|---|
| 1996Q2–2022Q4 | 13.79% | 9.53% | 1.45 | 7.49 |
| 2018Q1–2022Q4 | 14.04% | 9.09% | 1.54 | 3.45 |
| 2022Q1–2022Q4 | 18.27% | 4.29% | 4.26 | 4.26 |
| 1996Q2–2022Q4 | 16.28% | 7.39% | 2.20 | 11.39 |
| 2018Q1–2022Q4 | 12.09% | 7.60% | 1.59 | 3.56 |
| 2022Q1–2022Q4 | 28.43% | 8.23% | 3.45 | 3.45 |
| 1996Q2–2022Q4 | 18.91% | 13.40% | 1.41 | 7.30 |
| 2018Q1–2022Q4 | 17.55% | 11.70% | 1.50 | 3.35 |
| 2022Q1–2022Q4 | 37.68% | 5.29% | 7.12 | 7.12 |
| 1996Q2–2022Q4 | 20.86% | 10.16% | 2.05 | 10.62 |
| 2018Q1–2022Q4 | 13.64% | 9.66% | 1.41 | 3.16 |
| 2022Q1–2022Q4 | 34.21% | 10.10% | 3.39 | 3.39 |
Forecast Sharpe ratio, per quarter
| Horizon | Mean | 95% interval | P(neg) |
|---|---|---|---|
| Next quarter | 0.663 | 0.481 – 0.828 | 0.00 |
| Next year | 0.617 | 0.450 – 0.781 | 0.00 |
| Next five years | 0.488 | 0.253 – 0.702 | 0.00 |
| Next quarter | 1.083 | 0.883 – 1.248 | 0.00 |
| Next year | 0.974 | 0.791 – 1.119 | 0.00 |
| Next five years | 0.679 | 0.437 – 0.942 | 0.00 |
| Next quarter | 0.751 | 0.534 – 0.930 | 0.00 |
| Next year | 0.679 | 0.493 – 0.844 | 0.00 |
| Next five years | 0.481 | 0.258 – 0.687 | 0.00 |
| Next quarter | 0.876 | 0.703 – 1.009 | 0.00 |
| Next year | 0.798 | 0.636 – 0.929 | 0.00 |
| Next five years | 0.587 | 0.360 – 0.787 | 0.00 |