Saturday, May 2, 2009

VIX Model Backtested to 1990 for S & P 500/And 1986 to 1990 for S & P 100

I received an inquiry about the backtesting of the VIX Asset Allocation Model prior to the onset of the current bear market.  I have previously discussed in several posts that the model produced satisfactory results since the origin of VIX data in 1990.CBOE VOLATILITY INDEX Index Chart - Yahoo! Finance Several of those posts are linked in this general one.  VIX Asset Allocation Models  For the period prior to 1990, I used the same model to make hypothetical decisions looking at a volatility chart of the S & P 100 and the Trigger happened before the 1987 crash.Trading and Asset Allocation in Stable and Unstable VIX Pattern

More information about volatility indexes is available at the CBOE website. CBOE - Micro Site
There are some ETNs for volatility but LB is still working on how to use them.   see also, CBOE - Micro SiteCBOE - Micro Site  There are now volatility indexes for many indexes, and I have just discussed a few of them.  There is not enough data yet for LB to develop a model on gold and oil.  Each index requires adjustments in the basic model to account for the inherent stability or lack thereof in what is being tracked.  

Added:  The model does not require a spike above 30 to classify a move out of a stable VIX pattern as a Trigger, with some flexibility on classification, but confidence level in classifying the move as a Trigger is significantly enhanced by a spike above 30 out of a stable bull VIX pattern.    

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