Forecasting a Volatility Tsunami
18 Pages Posted: 11 Apr 2017
Date Written: April 10, 2017
The empirical aim of this paper is motivated by the anecdotal belief among the professional and non-professional investment community, that a “low” reading in the CBOE Volatility Index (VIX) or large decline alone are ample reasons to believe that volatility will spike in the near future. While the Volatility Index can be a useful tool for investors and traders, it is often misinterpreted and poorly used. This paper will demonstrate that the dispersion of the Volatility Index acts as a better predictor of its future VIX spikes.
Keywords: VIX, Volatility, Technical Analysis, Stocks, Trading, Market, Hedge, Risk, Equities
JEL Classification: G10, G11
Suggested Citation: Suggested Citation