Do Properly Anticipated Prices Fluctuate Randomly? Evidence from VIX Futures Markets
NBER Working Paper No. 24575
The VIX index is not traded on the spot market. Hence, in contrast to other futures markets, the VIX futures contract and spot index are not linked by a no-arbitrage condition. We examine (a) whether predictability in the VIX index carries over to the futures market, and (b) whether there is independent time series predictability in VIX futures prices. The answer to both questions is no. Samuelson (1965) was right: VIX futures prices properly anticipate predictability in volatility, and are themselves unpredictable.
You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.
Document Object Identifier (DOI): 10.3386/w24575