The economic value of VIX ETPs

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The fairly new VIX ETPs have been promoted for providing effective and easily accessible diversification, while at the same time having large negative returns. We examine the economic value of using VIX ETPs for diversification of stock–bond portfolios. 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 with a constant allocation strategy, the diversification benefits of the VIX ETPs do not offset their negative returns. This implies negative economic value of a constant allocation. For a dynamic allocation strategy, including short VIX ETPs in the investment opportunity set can have substantial positive economic value.

Original languageEnglish
JournalJournal of Empirical Finance
Volume58
Pages (from-to)121-138
Number of pages18
ISSN0927-5398
DOIs
Publication statusPublished - 2020

    Research areas

  • Economic value, Portfolio diversification, VIX, VIX ETPs, VIX premium

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ID: 189216184