Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets

George O. Aragon, Rajnish Mehra and Sunil Wahal

No 24575, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The VIX index is not traded on the spot market. Hence, in contrast to other futures markets, the VIX futures contract and spot index are not linked by a no-arbitrage condition. We examine (a) whether predictability in the VIX index carries over to the futures market, and (b) whether there is independent time series predictability in VIX futures prices. The answer to both questions is no. Samuelson (1965) was right: VIX futures prices properly anticipate predictability in volatility, and are themselves unpredictable.

JEL-codes: G1 G12 G13 G14 (search for similar items in EconPapers)
Date: 2018-05
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Published as George O. Aragon & Rajnish Mehra & Sunil Wahal, 2020. "Do Properly Anticipated Prices Fluctuate Randomly?," The Journal of Portfolio Management, vol 46(7), pages 144-159.

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