Evidence-based investing research
Login Join
Value Investing Strategy (Strategy Overview)
Allocations for November 2026 (Final)
Cash TLT LQD SPY
Momentum Investing Strategy (Strategy Overview)
Allocations for November 2026 (Final)
1st ETF 2nd ETF 3rd ETF

VVIX as a Return Indicator?

Steve LeCompte | | Posted in: Volatility Effects

Guide Volatility and the VIX The VIX as a signal

Key Insight

Monthly VVIX and monthly change in VVIX showed no reliable predictive relationship with next-month SPY returns; quintile averages were erratic (Sep 2006–Mar 2025; end-of-month lead-lag correlations and quintile sorts; descriptive, not a trading test).

Is the implied volatility of implied volatility (CBOE VVIX Index), interpretable as a measure of changes in investor fear level, a useful indicator of future stock market returns? To investigate, we relate monthly VVIX and monthly change in VVIX to monthly SPDR S&P 500 ETF Trust (SPY) total returns. Using end-of-month levels of both VVIX and dividend-adjusted monthly SPY closes during September 2006 (limited by VVIX) through March 2025, we find that:

Read this study free

The rest of this study: 370 words and 2 charts.

Enter your email and we’ll send you a link to this article. 3 premium articles a month, no password or card.

Volatility and the VIX guide

More on the vix as a signal

  • Asset Class ETF Interactions with VIX Premium Asset class ETF returns show moderately negative lead-lag correlations with future VIX, strongest for equities and missing for TLT and GLD; best and worst…
  • VVIX/VIX as a Return Indicator? Premium Monthly VVIX/VIX and its monthly change show no reliable relationship with next-month SPY returns; SPY returns lead VVIX/VIX, and quintile results are unsystematic (Sep…
  • VIX Seasonality Premium VIX average monthly changes are larger and more variable in February and July–October (VIX since Jan 1990; VIXY since Jan 2011; SVXY since Oct…
  • Exploit VIX Percentile Threshold Rule Out-of-Sample? Premium VIX Percentile Strategy (monthly SPY or T-bills by inception-to-date VIX percentile threshold; 70th-90th percentiles and 0-3 skip months tested) had lower CAGR but shallower…
  • Using VIX and Investor Sentiment to Explain Stock Market Returns Premium A joint high-VIX threshold (~80th percentile) and linear Baker-Wurgler sentiment model explains 4.7%, 10.8%, 19.2% and 28.7% of future S&P 500 excess return variation…

All 162 articles in the Volatility and the VIX guide

Further Reading

Sentiment Indicators Testing a Proxy for the Bank of America Bull & Bear Indicator A buy-low/sell-high strategy on Claude-estimated Bank of America Bull & Bear Indicator values (buy SPY below 2, sell... Volatility Effects VVIX/VIX as a Return Indicator? Monthly VVIX/VIX and its monthly change show no reliable relationship with next-month SPY returns; SPY returns lead VVIX/VIX,... Strategic Allocation, Volatility Effects SACEMS with Inverse VIX-based Lookback Intervals Update Inverse-VIX variable lookback (1-12 months) for SACEMS (monthly momentum rotation across asset-class ETFs) gives mixed results for Top... Sentiment Indicators Testing a Proxy for the Goldman Sachs Panic Index Claude-estimated Goldman Sachs Panic Index values (pixel-reconstructed from a chart) showed high readings (above 8) followed by 1.2%... Volatility Effects Asset Class ETF Interactions with VIX Asset class ETF returns show moderately negative lead-lag correlations with future VIX, strongest for equities and missing for... Volatility Effects Using SVXY to Capture the Volatility Risk Premium Monthly Skim (SVXY gains above the initial stake moved to BIL monthly; 0.2% switching frictions) ended with a...