Asymmetric Effects of Volatility Risk on Stock Returns: Evidence from VIX and VIX Futures

  • Fu X
  • Sandri M
  • Shackleton M
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Abstract

First, to separate different market situations, we focus on how VIX spot (í µí±‰í µí°¼í µí±‹), VIX futures (í µí±‰í µí±‹í µí°¹), and their basis (í µí±‰í µí°¼í µí±‹ − í µí±‰í µí±‹í µí°¹) perform different roles in asset pricing. Secondly, we decompose the VIX index into two parts, volatility calculated from out-of-the-money call options and volatility calculated from out-of-the-money put options. The analysis shows that information captured by out-of-the-money put options captures more useful information in predicting future returns.

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