MPRA Paper from University Library of Munich, Germany
Our trading strategy is inspired from the paper "implied volatility indices as leading indicators of stock index returns?", Giot (2002,). It uses stylized facts observed in stock markets: the so called "leverage effect", the clustering and the mean-reverting behaviour of the implied volatility. Based on S&P100 and VIX data, we show that abnormally high levels of volatility can be used as a trading signals for long traders. A bootstrap procedure confirms the significant returns for the 1986-2003 period.
Keywords: VIX; trading strategy (search for similar items in EconPapers)
JEL-codes: C32 C29 C53 (search for similar items in EconPapers)
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