There is a lot being printed trying to explain volatility (VIX).
VIX rises when stocks decline and declines when stocks rise. But what is driving volatility? Most analysts say it measures fear. It rises sharply when there is a crisis as in 2008 and now (click on the chart to enlarge it).
The trend of volatility is closely related to financial risk. I show this relationship in each issue of my The Peter Dag Portfolio.
The markets recognize there is an increase in financial risk. Two things happen. The first one is that my indicator measuring financial risk rises. Then VIX rises. Finally, stocks decline.
My point is that VIX reflects financial risk, not fear. And financial risk can be quantified.
George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 by Timer Digest
To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.
Disclaimer. No material here constitutes "investment advice" nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
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