# implementing Volatility Managed Portfolios

How to I calculate the value of c in the vol-managed equation specified by Moreira & Muir Volatilty Managed Portfolios (2016) Equation 1?

Portfolio return in month t+1 =$$\frac{c}{RV_t^2}f_{t+1}$$

where $$RV^2_t$$ is the Realized variance over the past month , $$f_{t+1}$$ is the factor return in the next month.

• Possible duplicate of Implementing Volatility Managed Strategies – skoestlmeier Dec 8 '18 at 15:45
Run the Volatility Managed Strategy over some historical period using an initial guess for $$c$$, say $$c_0=0.05$$. I will call this the Trial Run.
Compute the standard deviation of the strategy returns $$\sigma_0$$ and the standard deviation of the buy and hold returns $$\sigma_{BH}$$ over the same period.
Now run the Volatility Managed Strategy again over the same period but using $$c=\frac{\sigma_{BH}}{\sigma_0}c_0$$. This is the final run; you can check that the standard deviation of the VMS will be exactly equal to the standard deviation of buy and hold. And you are finished.