The Rational Reminder Podcast · Thursday, October 1, 2026
Victor Haghani explained that momentum strategies, particularly in risk assets, correlate with vol targeting. Vol targeting, which reduces exposure in volatile markets and increases it in calmer ones, aligns with momentum principles and contributes to better risk-adjusted returns. This correlation, along with the risk premium associated with momentum, helps explain why these strategies have historically persisted.
“And so momentum also happens to be correlated with the strategy of vol targeting. If you're doing vol targeting where you reduce exposure when the market becomes more volatile and you increase exposure when the market is calmer, Then, You're also following a bit of a momentum strategy.”
“That vol targeting, in our opinion, is a very rational, logical thing to do. It goes back to the Merton share. It goes back to... normal scaling logic of the higher my sharp ratio, the more exposure I want.”