August 4, 2020

Does Strategy Selection Adjust for Volatility Change?

This year has provided a unique opportunity to examine how traders’ choices of implementation strategy adjusts with changes in volatility regimes. 2020 to date has seen three distinctly different periods of price volatility. They can be classified as “Pre-Covid-19 Volatility,” “Peak Covid-19 Volatility” and “Post-Peak Volatility.” Did traders alter how they traded as the amount of volatility in the markets changed so significantly?

This week’s highlights:

  • In the period of peak Covid-19 volatility, there were clear preferences in trading strategy selection. These differed in the U.S. compared to EMEA.
  • High Touch strategies were popular in both regions but had the highest risk as measured by the variance of cost outcomes compared to other strategies.

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By Henry Yegerman

Email: Henry.Yegerman@issgovernance.com

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