In analyzing the performance of volatility-targeting strategies, we found that conventional volatility targeting fails to consistently improve performance in global equity markets and can lead to markedly greater drawdowns. Motivated by return patterns in various volatility states, we propose a strategy of conditional volatility targeting that adjusts risk exposures only in the extremes during high- and low-volatility states. This strategy consistently enhances Sharpe ratios and reduces drawdowns and tail risks, with low turnover and leverage, when used in the major equity markets and for momentum factors across regions. Conditional volatility management can also be applied to tactical allocations among multiple assets or risk factors. Disclosure: The authors report no conflicts of interest. The views expressed in this article are those of the authors in their personal capacity and do not reflect the views of the Rotterdam School of Management or the Abu Dhabi Investment Authority. Editor’s Note Submitted 6 March 2020 Accepted 23 June 2020 by Stephen J. Brown This article was externally reviewed using our double-blind peer-review process. When the article was accepted for publication, the authors thanked the reviewers in their acknowledgments. Lisa Goldberg and one anonymous reviewer were the reviewers for this article.

中文翻译：

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条件波动率目标

在分析波动率目标策略的表现时，我们发现传统的波动率目标无法持续改善全球股票市场的表现，并可能导致显着更大的回撤。受各种波动率状态下的回报模式的启发，我们提出了一种条件波动率目标策略，该策略仅在高波动率和低波动率状态下的极端情况下调整风险敞口。当用于主要股票市场和跨地区的动量因子时，该策略持续提高夏普比率并降低回撤和尾部风险，周转率和杠杆率较低。条件波动率管理也可以应用于多个资产或风险因素之间的战术分配。披露：作者报告没有利益冲突。本文中表达的观点是作者以个人身份发表的观点，并不反映鹿特丹管理学院或阿布扎比投资局的观点。编者按 2020 年 3 月 6 日提交 2020 年 6 月 23 日已被 Stephen J. Brown 接受 本文使用我们的双盲同行评审流程进行了外部评审。当文章被接受发表时，作者在致谢中感谢审稿人。Lisa Goldberg 和一位匿名审稿人是本文的审稿人。当文章被接受发表时，作者在致谢中感谢审稿人。Lisa Goldberg 和一位匿名审稿人是本文的审稿人。当文章被接受发表时，作者在致谢中感谢审稿人。Lisa Goldberg 和一位匿名审稿人是本文的审稿人。