A New Star Is Born: Does the VIX1D Render Common Volatility Forecasting Models for the US Equity Market Obsolete?

Stefan Albers

Journal of Futures Markets, 2025, vol. 45, issue 11, 2092-2108

Abstract: We examine the characteristics of Cboe's 1‐day Volatility Index (VIX1D) and its predictive power regarding the next day's volatility of the S&P 500. Compared to the longer‐term volatility indices of the VIX family, it is generally lower and more volatile, exhibits a weaker negative correlation with the S&P 500, and has a distinct intraday pattern with a daily upward trend. We show that the VIX1D overestimates the volatility of the S&P 500 and propose an easy‐to‐implement proxy to adjust for the inherent risk premium. Our results indicate that the adjusted VIX1D provides model‐free, parsimonious, and easy‐to‐implement 1‐day volatility forecasts for the S&P 500 that are even more precise than those of the HAR and HAR‐VIX1D models. We conclude that the VIX1D seems to effectively capture the information embedded in the zero‐day‐to‐expiration (0DTE) options and is a promising indicator for pinpointed risk assessment of the US stock market.

Date: 2025
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