Investment Strategy Utilizing the Volatility Index

• Main Authors: Samuel Dickson, 迪生山姆
• Other Authors: Chin Chang Chiang
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/52022068615259021033

碩士 === 國立中山大學 === 企業管理學系研究所 === 101 === This thesis is an investment strategy that seeks to profit from increases in market volatility. There have been several boom and bust cycles during the past fifteen years and volatility is projected to continue forward as a result of global asset misallocation and challenges stemming from debt liquidity. Volatility is measured by the Chicago Board of Options Exchange VIX volatility index. A proposed mean reversion strategy uses the VIX as a contrarian indicator of hope and fear to time decisions at extreme levels that have been determined through statistical analysis. This thesis found through back testing that market timing is possible at extreme levels of fear but is less reliable during extreme levels of hope and complacency. This strategy that utilizes measures of sentiment does however outperform the general market despite being active only five months on average per year. By synthesizing a broad range of fundamental, technical, and behavioral research, this thesis develops a unique contribution and practical set of market trading guidelines. The significance of these findings will help the individual investor to make better decisions during times of increased volatility.