Download This PaperDo Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets
40 Pages Posted: 7 May 2018 Last revised: 24 Feb 2023
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Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets
NBER Working Paper No. w24575
Number of pages: 40
Posted: 07 May 2018
Last Revised: 24 Feb 2023
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Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets
Posted: 08 May 2018
Last Revised: 25 Mar 2020
Date Written: May 2018
Abstract
The VIX index is not traded on the spot market. Hence, in contrast to other futures markets, the VIX futures contract and spot index are not linked by a no-arbitrage condition. We examine (a) whether predictability in the VIX index carries over to the futures market, and (b) whether there is independent time series predictability in VIX futures prices. The answer to both questions is no. Samuelson (1965) was right: VIX futures prices properly anticipate predictability in volatility, and are themselves unpredictable.
Suggested Citation: Suggested Citation
Aragon, George O. and Mehra, Rajnish and Wahal, Sunil, Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets (May 2018). NBER Working Paper No. w24575, Available at SSRN: https://ssrn.com/abstract=3174507
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