SYSTEM AND METHOD FOR VOLATILITY-BASED CHARACTERIZATION OF SECURITIES

A volatility-based securities index framework solves problems with the prior art. By recognizing that investors share the rational goal of earning the highest level of return for any level or risk, a volatility-based index provides investors with information about the most distinct choices in risk. Compared to known approaches, a volatility-based index framework partitions a securities market into much more differentiated segments which in turn provide much more distinct investment choices. Further, within each volatility segment, constituent members are more homogeneous facilitating a clearer understanding of each group's relative attractiveness. At an asset allocation level, improved risk choices expand opportunities to convert poorly compensated high risk investments into more attractive investments elsewhere. The persistence of volatility maintains style distinctions effectively over time, offering significant protection to tax exposed investors.