|Return type||Excess Return|
US equity markets appear to have a tendency to mean revert, meaning that large positive moves are often followed by negative ones (and vice versa). On average, this should result in a positive spread between the daily and bi-weekly realized variance of the returns of such markets.
*The SGI US Delta Cap Mean Reversion Index is a systematic index with its level published daily on Bloomberg, aiming to generate positive performance by capturing this potential spread through hypothetical positions that are long the daily variance and short the bi-weekly variance of the S&P 500 Index. Exposure to the spread is capped when exposure to the S&P 500 Index reaches an absolute value of 200%.
The SGI US Delta Cap Mean Reversion Index takes hypothetical long positions in the daily variance and hypothetical short positions in the bi-weekly variance of the S&P 500 Index, while capping its maximum exposure to the underlying S&P 500 Index at an absolute value of 200%. In addition, these hypothetical positions are rolled only on Tuesdays, Wednesdays, and Thursdays of each week over a two-week period, in order to avoid a potential weekend effect on the volatility of the S&P 500 Index on Mondays and Fridays.
*FOR THE PURPOSES OF THIS FACTSHEET, DAILY VARIANCE REFERS TO THE SUM OF THE SQUARED DAILY RETURNS OF THE S&P 500 OVER THE GIVEN PERIOD, WHEREAS BI-WEEKLY VARIANCE REFERS TO THE SQUARED SUM OF THE DAILY RETURNS OF THE S&P 500 OVER THE GIVEN PERIOD.