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What can inverse VIX contribute to an investment portfolio?

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  • Wei‐Han Liu
  • Jow‐Ran Chang

Abstract

This study investigates the performance of the Inverse VIX issued by following the frameworks in Bali et al. (2009) and Bali, Brown, and Demirtas (2013), which examine from the perspectives of asset weight of Inverse VIX and holding periods. We employ the refined definition of almost stochastic dominance by Chang, Liu, and Hung (2019) via its first‐ and second‐order definitions. We also compare this asset's performance with S&P 500 and a 30‐year T‐bond. The empirical evidence indicates that the Inverse VIX is preferred over the other two investment alternatives. Our conclusions indicate that the holding period length plays a role. It is recommended to increase the asset weight of the Inverse VIX within its upper limit that is bound to enhance portfolio performance.

Suggested Citation

  • Wei‐Han Liu & Jow‐Ran Chang, 2022. "What can inverse VIX contribute to an investment portfolio?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3791-3798, July.
    • Handle: RePEc:wly:ijfiec:v:27:y:2022:i:3:p:3791-3798
    DOI: 10.1002/ijfe.2351
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