The Economic Value of VIX ETPs

Publikation: Working paperForskning

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  • rp19_14

    Forlagets udgivne version, 1,54 MB, PDF-dokument

The fairly new VIX ETPs have been promoted for providing effective and easily accessible diversification. We examine the economic value of using VIX ETPs for diversification of stock-bond portfolios. We consider seven different investment strategies based on short-sales constrained and unconstrained investors who use four different investment styles for their optimization strategy. Our analysis begins in 2009, when the first VIX ETPs are introduced, and therefore only considers the period after the recent financial crisis. For investors prohibited from short selling, the diversification benefits of the VIX ETPs do not offset the negative returns on the VIX ETPs. Hence there is a negative economic value of including VIX ETPs in stock-bond portfolios. This applies to all investment styles. It even applies when adjusting for a simulated market crash. For investors who are not constrained from selling assets short, the results are mixed as the economic value of VIX ETPs vary with respect to investment tyle and product.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider60
StatusUdgivet - 18 sep. 2019
SerietitelCREATES Research Papers
Vol/bind2019-14

    Forskningsområder

  • VIX, VIX ETPs, Portfolio diversification, Realized volatility, Mean-variance analysis

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