Yang–Zhang Extension of Garman–Klass Volatility for Position Sizing

Summary

The document presents a Yang–Zhang extension of the Garman–Klass volatility estimator as an ex-ante volatility measure that can support position sizing in time-series and dual-momentum strategies. Its calculation combines squared overnight gaps, intraday high-low ranges, and close-to-open movements over a rolling window, then annualizes and adjusts the result for sample size.

The source describes the measure as highly precise, but provides no comparative tests or supporting evidence for that ranking. It also does not explain how to convert the volatility estimate into a target position, or discuss parameter selection, market assumptions, or implementation details beyond the formula. Treat its stated role in sizing as context rather than a complete sizing method.

Key ideas

• The estimator combines overnight, intraday range, and open-to-close price movements.
• It aggregates these components over a rolling period and annualizes the resulting volatility estimate.
• The document proposes the measure as an input to position sizing for momentum strategies.
• Its claim of precision is not accompanied by validation or comparison results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.