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Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets

Author

Listed:
  • George O. Aragon
  • Rajnish Mehra
  • Sunil Wahal

Abstract

The VIX index is not traded on the spot market. Hence, in contrast to other futures markets, the VIX futures contract and spot index are not linked by a no-arbitrage condition. We examine (a) whether predictability in the VIX index carries over to the futures market, and (b) whether there is independent time series predictability in VIX futures prices. The answer to both questions is no. Samuelson (1965) was right: VIX futures prices properly anticipate predictability in volatility, and are themselves unpredictable.

Suggested Citation

  • George O. Aragon & Rajnish Mehra & Sunil Wahal, 2018. "Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets," NBER Working Papers 24575, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24575
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    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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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