CBOE Volatility Index
Chart of the Week for November 18, 2016 - November 24, 2016
The Chicago Board Options Exchange (CBOE) Volatility Index ("VIX") is a key measure of investor expectations for equity market volatility risk over the forward 30-day period. It is considered a good barometer of investor sentiment and is often referred to as the "fear" index. A high VIX level is generally associated with a period of increased volatility and uncertainty in the market, while a lower level corresponds to less volatility and less stress in the market.
As noted in the chart above covering the period of September 1, 2016 through November 14, 2016 surrounding the U.S. Presidential Election, the VIX can change dramatically as investor concerns change. As various news events occurred during the period, the VIX reached a high of 22.5 on November 4, and the low during the period was 11.9 on September 7. The average value was 15.0 during the period. On Election Day the VIX closed at 22.5, but for the four days following the election through November 14, the VIX traded below the period average in a range of 14.2 to 14.7.
Spikes in volatility cannot be predicted and fear of volatility or continued volatility without a long-term plan may lead to imprudent decision making. Prudent investors should base decisions on their own circumstances taking into consideration their goals, investment experience, time horizon and risk tolerance and not just the latest movement in the market.
Posted by: sarah_oz@yahoo.com
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