Apr 21, 2013

VIX,V2X Forecasts May 2013

Since last month when I made forecasts for all tradable CBOE indexes volatility rose across the board, in some cases dramatically. While my forecasts were for lower settlement prices, they were higher in all cases - VIX by 2.28 points, VSTOXX by 2.76. GVZ - CBOE Gold volatility index based on GLD ETF options almost doubled in volatility. Still the model is on track - the simulated PL - not a perfect measure but still a reasonable one, is positive ytd, and sign accuracy is over 52%. The model unfortunately lags on statistical accuracy tests, MAPE and MSE. As always, you can see the results of previous predictions on volatility tracker spreadsheet.

So, what's next for volatility indexes? My model predicts the volatility spike to dissipate, and volatility to come down to lower levels - VIX to expire at 13.88 vs 17.20 in futures, VSTOXX to expire at 18.83 vs 21.05 in futures. Other volatility forecasts are logged in the spreadsheet.

In other market related news, SGLS reports that US Congress voted to make STOCK ("Stop Trading on Congressional Knowledge") act ineffective. It is no secret that members of government routinely use privileged information to trade in stock market. There are equivalent laws for private sector - insider trading laws, and I believe that there should be similar rules for government employees. It is a dirty, shameful development, and unfortunately this means that insider trading by government employees is set to continue with impunity. 

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