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George Bonne
Executive Director of Equity Factor Research
About the Contributor
George Bonne is Executive Director in the Equity Factor Research team, which develops new factors for MSCI’s analytics and index products. Previously, George was Director of Quantitative Research at Thomson Reuters StarMine, where he created alpha signals and quantitative. He also has worked at Applied Materials and KLA-Tencor. George received his Ph.D. in Physical Chemistry from Harvard University and a Bachelor’s degree in Chemistry from University of California, Irvine. George is a certified Professional Risk Manager.
Blog posts by George Bonne
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Investors need a clear and consistent way to talk about factors. For more than 40 years, MSCI has defined how investors use factors to analyze risk and return, from individual stocks to entire portfolios. Factors are important drivers of portfolio performance and are well documented in academic research. They are used to quantify how much risk and return is attributable to different countries, sectors and styles.
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In May, we wrote that despite the generally low market volatility that has prevailed this year, investors were paying relatively high prices for downside protection as measured by “options skew” – the difference in implied volatility between an out-of-the-money option and an at-the-money option. High skew levels indicate heightened fears of “tail risk” – the chances of unlikely but highly consequential events that could sink share prices. Low market volatility largely continued through the summer, but how has options skew behaved – has it fallen to more “normal” levels?
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It’s been widely reported that equity-market volatility, outside of a mid-May spike, has been oddly low given investor concerns that range from North Korean saber-rattling to the fate of tax cuts proposed by the Trump Administration.
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Although global uncertainties remain high, the CBOE VIX Index — also known as the “fear index,” recently reached its lowest level since 1993. Some observers have questioned whether VIX remains a reliable indicator.