The fear of fear in the US stock market: Changing characteristics of the VVIX

Stefan Albers

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: By analyzing the characteristics of Cboe’s volatility-of-volatility (vol-of-vol) index (VVIX), this study reveals that most but not all stylized facts of volatility are also applicable to the vol-of-vol. The VVIX exhibits robust mean reversion, distinct jumps in both directions, an asymmetric relationship with the S&P500 index, weak day-of-the-week effect, and fast incorporation of new market information. Surprisingly, results indicate a significant upward trend in its level that stems partly from a higher variation of the VIX and a higher vol-of-vol risk premium. An increased and robust correlation with the VIX matches the evolution of the VIX options market till 2013.

Keywords: VIX; VVIX; Volatility-of-volatility; Implied volatility; Stylized facts (search for similar items in EconPapers)
JEL-codes: D83 G12 G13 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002982

DOI: 10.1016/j.frl.2023.103926

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