Tuesday, February 27, 2007

One Day 30% (!) Spikes in the VIX

Nobody has asked yet, but I might as well save those who are contemplating the question a few keystrokes.

Since the VIX was officially rolled out in 1993, there have been only 4 days in which it spiked up 30% or more. Turn the clock back to 1990 and you find a total of 8 days.

For those who might be interested, the mean reversion expectations following a +30% move are very similar to that of +20% days, which I weighed in on this morning. The data sample size is small enough to not be statistically significant, but still, in the 3, 5 and 10 days following the VIX spikes, 6/8, 7/8 and 5/8 of the VIX moves had reversed. The mean retracements were 9% and 11% over the 3 and 5 day period, but 10 days out, the mean move had continued upward 4%, owing largely to the strength of one subsequent 52% spike in the VIX.

The VIX has not made a 40% move to the up side since February 2, 1994, when the Fed’s decision to raise interest rates sent shock waves through the markets.

1 comments:

HeadlineCharts said...

Hi, I posted a monthly VIX chart to HeadlineCharts and was wondering if you could help me out with any thoughts about it. I had a long day, and I'm too tired to think! I really like your blog by the way. I just started getting into it.

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