Munich Personal RePEc Archive

Fear Trading

Ardia, David (2003): Fear Trading.

[img]
Preview
PDF
MPRA_paper_12983.pdf

Download (541kB) | Preview

Abstract

Our trading strategy is inspired from the paper "implied volatility indices as leading indicators of stock index returns?", Giot (2002,[3]). It uses stylized facts observed in stock markets: the so called "leverage effect", the clustering and the mean-reverting behaviour of the implied volatility. Based on S&P100 and VIX data, we show that abnormally high levels of volatility can be used as a trading signals for long traders. A bootstrap procedure confirms the significant returns for the 1986-2003 period.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.