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VIX Below 10 Rant

Values of VIX below 10 occurred before the 1990s uptrend and then near the top of the 2000s uptrend. The sample is so small and the evidence totally inconclusive. Do not look for help from VIX in forecasting future direction of the stock market.

Below is the chart of VIX with occurrences below 10 and below 9.5.

It may be seen from the above chart that the {VIX < 10} sample is small (23 occurrences) and inconclusive due to clustering. The previous two low volatility clusters occurred at the start and near the end of the last two uptrends. There is nothing to gain here. Someone should put an end to this rant in social media about VIX. Anyone who understands little about volatility knows a few things about VIX

  • VIX is not a pure volatility measure
  • VIX is a product, not an indicator
  • VIX is highly correlated with the inverse S&P 500
  • VIX is not usseful in forecasting price levels
  • VIX may become the cause of staggering losses for naive market participants

So someone, please help to end this rant about VIX. I had enough, haven’t you?

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Charting and backtesting program: Amibroker


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