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Suspicious VIX

Evholt, Sophie LU and Leandersson, Andreas LU (2015) NEKH01 20142
Department of Economics
Abstract
The aim of this essay is to study if the Chicago Board of Options Exchange’s volatility index VIX can be used as an indicator on the stock market, and if an investor can make a profit on portfolios by using a volatility strategy based on VIX. The study is based on nine volatility strategies that are tested on four different portfolios containing stocks from Mega Cap, Large Cap, Mid Cap and Small Cap. The strategies are also tested under different economic situations: before, during and after the big bank crisis in 2008. The theoretical frame of the study is founded of regression analysis, the efficient market hypothesis and behavioural finance. The two latter are the core base for the analysis.

The study shows that the strategies work... (More)
The aim of this essay is to study if the Chicago Board of Options Exchange’s volatility index VIX can be used as an indicator on the stock market, and if an investor can make a profit on portfolios by using a volatility strategy based on VIX. The study is based on nine volatility strategies that are tested on four different portfolios containing stocks from Mega Cap, Large Cap, Mid Cap and Small Cap. The strategies are also tested under different economic situations: before, during and after the big bank crisis in 2008. The theoretical frame of the study is founded of regression analysis, the efficient market hypothesis and behavioural finance. The two latter are the core base for the analysis.

The study shows that the strategies work best under periods, where the market is very volatile, like under the big bank crisis. The results also show that VIX is a good market indicator and can be used to make a profit mainly on Small Cap portfolios and that the strategies are better as short-term strategies than long-term. (Less)
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author
Evholt, Sophie LU and Leandersson, Andreas LU
supervisor
organization
alternative title
En studie om VIX-strategier och förmågan att generera överavkastning
course
NEKH01 20142
year
type
M2 - Bachelor Degree
subject
keywords
Volatility index, VIX, behavioural finance, regressionanalysis, volatilitystrategies, efficent market hypothesis
language
Swedish
id
5052049
date added to LUP
2015-02-20 08:26:09
date last changed
2015-02-20 08:26:09
@misc{5052049,
  abstract     = {The aim of this essay is to study if the Chicago Board of Options Exchange’s volatility index VIX can be used as an indicator on the stock market, and if an investor can make a profit on portfolios by using a volatility strategy based on VIX. The study is based on nine volatility strategies that are tested on four different portfolios containing stocks from Mega Cap, Large Cap, Mid Cap and Small Cap. The strategies are also tested under different economic situations: before, during and after the big bank crisis in 2008. The theoretical frame of the study is founded of regression analysis, the efficient market hypothesis and behavioural finance. The two latter are the core base for the analysis.

The study shows that the strategies work best under periods, where the market is very volatile, like under the big bank crisis. The results also show that VIX is a good market indicator and can be used to make a profit mainly on Small Cap portfolios and that the strategies are better as short-term strategies than long-term.},
  author       = {Evholt, Sophie and Leandersson, Andreas},
  keyword      = {Volatility index,VIX,behavioural finance,regressionanalysis,volatilitystrategies,efficent market hypothesis},
  language     = {swe},
  note         = {Student Paper},
  title        = {Suspicious VIX},
  year         = {2015},
}