From the course: Behavioral Finance Foundations

Unlock the full course today

Join today to access over 22,600 courses taught by industry experts or purchase this course individually.

The VIX

The VIX

From the course: Behavioral Finance Foundations

Start my 1-month free trial

The VIX

“

- One example of the behavioral biases in capital markets comes from the VIX or Volatility Index. The VIX is an index that represent market volatility and is often referred to as the markets fear gauge. Let's take a look at the VIX, shall we? So I'm here on the CNBC page for the VIX. And this just shows the price of the VIX over the last one year. We can see that the VIX one year ago was trading at roughly $12 and at present is trading at just under $15. Now, unlike stocks, the VIX goes up when the market falls. If stocks fall, the VIX rises. So if I were to look back over time, what happened to the VIX? Well when was the VIX very high? If we look at 2008, a period when stocks were doing terribly, the VIX was at a very very high level. Why? Well because the VIX represents market volatility. As the market collapses, and becomes more volatile and riskier, the VIX rises. In periods when stocks are doing really well,…

Contents