Application of VIX and entropy indicators for portfolio rotation strategies

Gaurav Jadhao and Abhijeet Chandra

Research in International Business and Finance, 2017, vol. 42, issue C, 1367-1371

Abstract: In our study, we use sample entropy and approximate entropy indicators − derived from the India Volatility Index (India VIX) − to explore the feasibility of style, size and time horizon-based portfolio rotation strategies. We show that these two entropy-based indicators are significantly and strongly related to portfolio rotation strategy based on style and size than the trading strategies based on signals derived from percentage change in India VIX. Finally, the comparative portfolio performances show that the trading strategies based on sample entropy outperform those based on VIX change. These results provide evidence of the prospect for new investment and diversification strategies in the otherwise less-studied emerging markets.

Keywords: India VIX; Sample entropy; Approximate entropy; Portfolio management; Trading strategy (search for similar items in EconPapers)
JEL-codes: C63 G11 G17 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:42:y:2017:i:c:p:1367-1371

DOI: 10.1016/j.ribaf.2017.07.074

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