Wednesday, March 7, 2012

VIX Fun Fact

Eddy Elfenbein tweeted this fun fact:

Take whatever today's $VIX is. Divide it by 3.46. That's the market's view of the 1 stand dev range +/- for the next 30 days. $$
For those keeping track at home, 3.46 = 12^(1/2)

And here are the results... blue is the +/- expected range based on the VIX and the red is how well the S&P 500 performed over the following month (i.e. one month returns, one month forward).

For more detail on how well the VIX predicts equity returns, see past posts:

1 comment:

  1. Volatility Research has come up with a pretty good way to predict VIX "fear index" volatility as measured by NYSE VXX:

    And it's free, no gimmicks, strings or ads!