Stats › Tradeable patterns › VIX curve slope
Holding front month VIX cost 48.77% a year since 2011
| Study and sample | What the slope was tested against | Result |
|---|---|---|
| Simon and Campasano, Jan 2006 to Dec 2011 | Subsequent change in the VIX index | No significant forecast power in any specification |
| Simon and Campasano, same sample | Subsequent change in the VIX future's own price | Coefficient -0.79, highly significant, R squared about 0.10. The future gives back about 79% of its gap to the VIX over the following month |
| Simon and Campasano, trades Jan 2007 to Dec 2011 | A daily roll rule, enter beyond 0.10 points, exit at 0.05 or 9 business days | Sortino 1.26 on the short side and 1.03 on the long, profitable after costs |
| Fassas and Hourvouliades, Jan 2010 to Dec 2017 | Subsequent S&P 500 returns, curve inverted | Inversion predicted positive equity returns, significant at one day, one week and one quarter. Adjusted R squared 0.009 to 0.035 |
Sources: Simon and Campasano, Journal of Derivatives, Spring 2014; Fassas and Hourvouliades, Journal of Risk and Financial Management, 2019; Feldman, Jung and Lin, Journal of Wealth Management, Fall 2018.
The VIX curve slopes upward most of the time, so a fund holding the front future pays to roll it. Since 2011 the front cost 48.77 per cent a year against 18.03 for five months out. The slope predicts the futures, not the index.
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