The Daily Closing VIX Data for 2008 Reveal Unrecognized Properties

26 Pages Posted: 16 Jul 2009  

Maria T. Gonzalez-Perez

Universidad Complutense de Madrid - Colegio Universitario de Estudios Financieros (CUNEF)

David E. Guerrero

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF)

Arthur B. Treadway

affiliation not provided to SSRN

Date Written: July 1, 2009

Abstract

Data analyses of daily closing VIX in 2008 reveal that: (1) the value of the lambda parameter, in the one-parameter Box and Cox (1964) family, appropriate for VIX, is around -.4 and is very far from one (no transformation) and zero (logarithm), the values typical of most of the literature, (2) the optimally transformed VIX follows an I(1) stochastic process, so that undifferenced VIX, transformed or not, does not have properties propitious for statistical analysis and (3) there are occasional large and unforecastable anomalous events in VIX data that, if ignored, can seriously distort any sort of statistical analysis. We achieve a linear, normal, homoskedastic representation of this data by transforming VIX in the B-C sense, modeling anomalous values explicitly and with a very simple IMA(1,1) model that is almost a random walk.

Keywords: time series analysis, volatility index, forecasting

JEL Classification: C32, G13, G15

Suggested Citation

Gonzalez-Perez, Maria T. and Guerrero, David E. and Treadway, Arthur B., The Daily Closing VIX Data for 2008 Reveal Unrecognized Properties (July 1, 2009). Available at SSRN: https://ssrn.com/abstract=1435020 or http://dx.doi.org/10.2139/ssrn.1435020

Maria T. Gonzalez-Perez (Contact Author)

Universidad Complutense de Madrid - Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain
+34 914 48 08 92 (Phone)
+34 915 93 31 11 (Fax)

David E. Guerrero

Universidad Complutense de Madrid (UCM) - Colegio Universitario de Estudios Financieros (CUNEF) ( email )

Serrano Anguita 9
Madrid, Madrid 28004
Spain

Arthur B. Treadway

affiliation not provided to SSRN ( email )

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