Vix Signaled Switching for Style-Differential and Size-Differential Short-Term Stock Investing
Finance Letters, Forthcoming
Posted: 10 Jul 2006
Using VIX movements as signals, this study examines the Copeland and Copeland (1999) short-term style-differential (i.e. value versus growth) and size-differential (i.e. large-capitalization versus small-capitalization) stock allocation strategies. Unlike Copeland and Copeland (1999), this study analyzes the style-differential and size-differential strategies across low-VIX and high-VIX regimes, uses different time periods and different indices. In this study the style-differential strategy was not, while the size-differential strategy was generally statistically significantly profitable. The Copeland and Copeland (1999) anomaly that large capitalization (i.e. lower risk) stock returns exceed those for small capitalization (i.e. higher risk) stocks following VIX rises seems to be robust.
Keywords: Market Volatility, Trading Strategies
JEL Classification: G11, G14
Suggested Citation: Suggested Citation