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VIX Futures as a Market Timing Indicator

1
Department of Accounting and Finance, University of Thessaly, Larissa 41110, Greece
2
Department of Business Studies, American College of Thessaloniki, Thessaloniki 55535, Greece
*
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(3), 113; https://doi.org/10.3390/jrfm12030113
Received: 10 June 2019 / Revised: 24 June 2019 / Accepted: 28 June 2019 / Published: 1 July 2019
(This article belongs to the Section Financial Markets)
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Abstract

Our work relates to the literature supporting that the VIX also mirrors investor sentiment and, thus, contains useful information regarding future S&P500 returns. The objective of this empirical analysis is to verify if the shape of the volatility futures term structure has signaling effects regarding future equity price movements, as several investors believe. Our findings generally support the hypothesis that the VIX term structure can be employed as a contrarian market timing indicator. The empirical analysis of this study has important practical implications for financial market practitioners, as it shows that they can use the VIX futures term structure not only as a proxy of market expectations on forward volatility, but also as a stock market timing tool. View Full-Text
Keywords: VIX futures; volatility term structure; future equity returns; S&P500 VIX futures; volatility term structure; future equity returns; S&P500
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Fassas, A.P.; Hourvouliades, N. VIX Futures as a Market Timing Indicator. J. Risk Financial Manag. 2019, 12, 113.

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