Market timing using the VIX for style rotation

Authors

  • Brian Boscaljon Department of Finance, Penn State Erie, The Behrend College
  • Greg Filbeck Department of Finance, Penn State Erie, The Behrend College
  • Xin Zhao Department of Finance, Penn State Erie, The Behrend College

DOI:

https://doi.org/10.61190/fsr.v20i1.4689

Keywords:

rebalance, Asset allocation, VIX

Abstract

We examine the effectiveness of the market volatility index (VIX) provided by the Chicago Board Options Exchange in timing shifts for style asset allocation. The findings of Copeland and Copeland (1999) suggest portfolios of value stocks outperform (underperform) portfolios of growth stocks following an increase (decrease) in the VIX index. We find some evidence supporting their initial findings using data from 1990 to 2008 that corresponds with the Chicago Board Options Exchange new VIX measurement. However, the results of this study are only statistically significant for longer holding periods of 30 days or more. Thus, for longer holding periods individuals may be able to gain economically significant returns by rebalancing their portfolios between value and growth stocks based on changes in the VIX index.

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Published

2011-03-31

How to Cite

Boscaljon, B., Filbeck, G., & Zhao, X. (2011). Market timing using the VIX for style rotation. Financial Services Review, 20(1), 35–44. https://doi.org/10.61190/fsr.v20i1.4689

Issue

Vol. 20 No. 1 (2011): FSR Spring 2011

Section

New Original Submission

License

Copyright (c) 2011 Academy of Financial Services

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