Tom, Tony and Anton discuss the movements in the VIX relative to the movements in the market to quantify how much we expect VIX to move when the market has an up day or a down day.Study
- SPY and VIX
- 2000 to present
- Computed average and standard deviation of average of VIX moves during SPY up days and down days separately
- Computed conditional probabilities of VIX and SPY movements
We find that, on average, the VIX moves with more magnitude and has more variance when the SPY is down, compared to when SPY is up. Additionally, the chance of SPY and VIX moving in the same direction is 20%: 10% both up, and 10% both down.