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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: SpecialK who wrote (8769)	2/25/2003 12:13:09 PM
From: Sun Tzu	Read Replies (3) \| Respond to of 95640

Very true. My point was that I hear a lot of talk that says a high VIX must mean a big drop in stock prices. Now stocks drop much faster than they rise. So by definition you will have a high VIX value during market falls. But this does not give VIX magical predictive powers. There is in fact a predictive component to VIX. To study that you have to look at rises in VIX when there was no market fall (i.e false signals) and rises in VIX before market tops (i.e. predictive signals). I think Barron's published a study on this and it turned out that VIX was very mildly predictive (around 50-60%). It should not come as surprise that the current geopolitical tensions push VIX higher or that stocks may fall on the war news. But here again, VIX is a reactive measure rather than a predictive one. Besides, Brian is a 100% right that a widely fallowed indicator fails to be one. ST