Idiosyncratic Volatility Strategy
Short high residual-vol names and long low residual-vol names — Ang et al.’s IVOL puzzle as a book.
Definition
Idiosyncratic Volatility Strategy refers to vol names and long low residual-vol names — Ang et al.’s IVOL puzzle as a book. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
It is a named object desks use to frame risk, positioning, or process. When vol names and long low residual-vol names — Ang et al.’s IVOL puzzle as a book shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what idiosyncratic volatility strategy is saying. If vol names and long low residual-vol names — Ang et al.’s IVOL puzzle as a book moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Keep the definition fixed, then challenge it with cross-checks before sizing. Prefer a short written null hypothesis for Idiosyncratic Volatility Strategy: what would falsify the current reading in the next window?