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Market Efficiency Test in the VIX Futures Market

Author

Listed:
  • Jian Zhang
  • Lee W. Sanning
  • Sherrill Shaffer

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.

Suggested Citation

  • Jian Zhang & Lee W. Sanning & Sherrill Shaffer, 2010. "Market Efficiency Test in the VIX Futures Market," CAMA Working Papers 2010-08, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2010-08
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/08_zhang_sanning_shaffer_2010.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mardi Dungey & Gerald Dwyer & Thomas Flavin, 2013. "Systematic and Liquidity Risk in Subprime-Mortgage Backed Securities," Open Economies Review, Springer, vol. 24(1), pages 5-32, February.

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    More about this item

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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