Market Efficiency Test in the VIX Futures Market

CAMA Working Paper No. 08/2010

29 Pages Posted: 31 Aug 2010

See all articles by Zhang Jian

Zhang Jian

affiliation not provided to SSRN

Lee W. Sanning

University of Wyoming - College of Business

Sherrill Shaffer

University of Wyoming

Date Written: February 1, 2010

Abstract

This paper tests the random walk hypothesis and weak form market efficiency in the VIX futures market using a variety of tests. A unit root in the aggregated market price series suggests that the VIX futures market is efficient. For the individual VIX futures price series, 51 of 54 futures contracts meet the sufficient condition for an efficient market: the prices are found to follow a random walk either because there is a unit root or because the increments are not correlated. Overall, the market for VIX futures has been efficient since the first day of trading.

Keywords: Random Walk, Market Efficiency, VIX futures

JEL Classification: G13, G14

Suggested Citation

Jian, Zhang and Sanning, Lee W. and Shaffer, Sherrill, Market Efficiency Test in the VIX Futures Market (February 1, 2010). CAMA Working Paper No. 08/2010. Available at SSRN: https://ssrn.com/abstract=1668129 or http://dx.doi.org/10.2139/ssrn.1668129

Zhang Jian

affiliation not provided to SSRN ( email )

Lee W. Sanning (Contact Author)

University of Wyoming - College of Business ( email )

1000 E. University Avenue
Laramie, WY 82071
United States
307-766-3848 (Phone)

Sherrill Shaffer

University of Wyoming ( email )

P.O. Box 3985
Laramie, WY 82071-3985
United States
307-766-2173 (Phone)
307-766-5090 (Fax)

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