High Dividend Maximum Upside Volatility

Solactive Research has published a new white paper titled High Dividend Maximum Upside Volatility Indices: Financial Index Engineering for Structured Products, in which a new family of quantitative indices – labelled Solactive High Dividend Maximum Upside Volatility Indices – is introduced for the first time to the public. The index family is designed specifically with structured products in mind and seeks to create a portfolio of highly liquid stocks exhibiting very high upside volatility, while demoning a consistently high dividend yield.

The paper takes one of the indices in the family, the Solactive High Dividend Upside Volatility Euro 5% AR Index, and compares it to a portfolio of the 50 largest Eurozone blue-chip stocks. The paper finds that the index performs similarly to its benchmark. While it exhibits larger drawdowns during bear markets, it recovers faster during up-markets, eventually bouncing back and overtaking the benchmark. Despite the performance drag and the high volatility, the index still generates sufficient outperformance to realize a better Sharpe ratio and achieve a significantly higher dividend yield compared to its benchmark.