Annual VIX Cycle Remains Consistent in 2008

Two years ago, when I was the only person reading this blog, I posted about VIX seasonal patterns in A Month By Month Look at the VIX. Since the original post I have received quite a few requests to update the chart with more recent data.

On the heels of Tuesday’s VIX Holiday Crush, I am pleased to broaden the seasonal picture of the VIX with a current version of 19 years of VIX data as a composite annual cycle. The chart below has changed very little from the January 2007 version. In fact, 2008 followed the historical patterns established in previous years almost perfectly, with the VIX increasing in the January-March period, dropping through May and June, then spiking dramatically in September and October.

I have my doubts about whether this pattern will play out in future years, but the more times volatility wanders down this same seasonal path, the more time traders will be looking for a repeat in the following year.

Comments

[Anthony Alfidi:]

The "holiday effect" of lighter trading in Nov-Dec is clear. But what explains the Aug-Oct peak?

2008 Dec 24 05:02 PM

[Gene Jaquet:]

Just a thought : this chart matches, almost perfectly, the seasonal pattern in advertising spend (an area I know well). Could it match the seasonal patterns of other, unrelated, economic activities? If so, the conclusion could be that this analysis is redundant and of no predictive value.

2008 Dec 29 05:58 AM