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Historical Volatility Term Structure And Its Forecasting Properties

This backtest is performed based on an algorithm posted on the community on April 16, 2018. In that previous backtest, 30% of the portfolio were shorted if the VRP was in the first quantile, and 10% were shorted if the VRP was in the second quartile.

I have slightly modified this strategy. In this new backtest, 30% of the portfolio is shorted if the VRP is in the first quartile, but instead of 10% in the second case, we short 30% if the VRP is in the second quartile . If VRP is in the fourth quartile, we buy 10%, and when it falls in the fifth quartile we buy 30%.

The result of this strategy is a significant higher returns than was obtained for the strategy posted on April 16, 2018.