2024/03/02 by Hayden Brown, Brown, Hayden
Economics, Econometrics and Finance · #Capital Investment and Risk Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2403.01088
openalex publication_date 2024/03/02 · openalex created_date 2024/03/06 · openalex updated_date 2026/07/28
Over the past 60 years, there has been a gradual increase in the volatility of daily returns for the S&P 500 Index. Hypothetically, suppose that market forces determine daily volatility such that a daily leveraged S&P 500 fund cannot outperform a standard S&P 500 fund in the long run. Then this hypothetical volatility happens to support the increase in volatility seen in the S&P 500 index. On this basis, it appears that the classic argument of the market portfolio being unbeatable in the long run is determining the volatility of S&P 500 daily returns. Moreover, it follows that the long-term volatility of the daily returns for the S&P 500 Index should continue to increase until passing a particular threshold. If, on the other hand, this hypothesis about market forces increasing volatility is invalid, then there is room for daily leveraged S&P 500 funds to outperform their unleveraged counterparts in the long run.