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VIX Futures as a Market Timing Indicator

Author

Listed:
  • Athanasios P. Fassas

    (Department of Accounting and Finance, University of Thessaly, Larissa 41110, Greece)

  • Nikolas Hourvouliades

    (Department of Business Studies, American College of Thessaloniki, Thessaloniki 55535, Greece)

Abstract

Our work relates to the literature supporting that the VIX also mirrors investor sentiment and, thus, contains useful information regarding future S&P500 returns. The objective of this empirical analysis is to verify if the shape of the volatility futures term structure has signaling effects regarding future equity price movements, as several investors believe. Our findings generally support the hypothesis that the VIX term structure can be employed as a contrarian market timing indicator. The empirical analysis of this study has important practical implications for financial market practitioners, as it shows that they can use the VIX futures term structure not only as a proxy of market expectations on forward volatility, but also as a stock market timing tool.

Suggested Citation

  • Athanasios P. Fassas & Nikolas Hourvouliades, 2019. "VIX Futures as a Market Timing Indicator," JRFM, MDPI, vol. 12(3), pages 1-9, July.
    • Handle: RePEc:gam:jjrfmx:v:12:y:2019:i:3:p:113-:d:244838
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    References listed on IDEAS

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    Cited by:

    1. Ran Lu & Hongjun Zeng, 2022. "VIX and major agricultural future markets: dynamic linkage and time-frequency relations around the COVID-19 outbreak," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 40(2), pages 334-353, September.
    2. Bartosz Łamasz & Natalia Iwaszczuk, 2020. "The Impact of Implied Volatility Fluctuations on Vertical Spread Option Strategies: The Case of WTI Crude Oil Market," Energies, MDPI, vol. 13(20), pages 1-23, October.
    3. Luigi Buzzacchi & Luca Ghezzi, 2021. "The Odds of Profitable Market Timing," JRFM, MDPI, vol. 14(6), pages 1-14, June.

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