Portfolio Effects of VIX Futures Index

Portfolio Effects of VIX Futures Index

This paper tests short-term and mid-term VIX indexes as a hedge and safe haven asset against U.S. stock risk from January 2006 through July 2016. GARCH dynamic conditional correlation analysis indicates that VIX indexes are an effective hedge due to the consistent inverse relationship between the VI...

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Bibliographic Details
Main Authors: Mitchell Ratner, Chih-Chieh (Jason) Chiu
Format: Article
Language:English
Published: AIMS Press 2017-10-01
Series:Quantitative Finance and Economics
Subjects:
VIX
volatility
stock risk
hedge
safe haven
Online Access:http://www.aimspress.com/QFE/article/1646/fulltext.html
Description
Summary:This paper tests short-term and mid-term VIX indexes as a hedge and safe haven asset against U.S. stock risk from January 2006 through July 2016. GARCH dynamic conditional correlation analysis indicates that VIX indexes are an effective hedge due to the consistent inverse relationship between the VIX indexes and stocks. VIX indexes are either a strong or weak safe haven in times of extreme stock market volatility. Additionally, VIX indexes provide a strong safe haven during recent periods of turmoil including the 2008 global financial crisis, the 2011 downgrade of the U.S. government triple-A credit rating, and the 2016 U.K. vote to leave the E.U. (Brexit).
ISSN:2573-0134

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