VIX Futures as a Market Timing Indicator

Athanasios Fassas and Nikolas Hourvouliades
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Nikolas Hourvouliades: Department of Business Studies, American College of Thessaloniki, Thessaloniki 55535, Greece

JRFM, 2019, vol. 12, issue 3, 1-9

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.

Keywords: VIX futures; volatility term structure; future equity returns; S&P500 (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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