The Williams VIX Fix

There have been a number of useful research posts put out there recently from ETF Prophet, Woodshedder and CSS.

I wanted to have a look at the FTSE and see how it compared. My eventual aim is to look at how it impacts Mean Reversion strategies, but first I wanted to see how it impacted returns on the FTSE 100 itself.There are various ways to measure volatility with proxy being the VIX volatility index. The problem is that there is no UK VIX and it would be a pain to apply the VIX to the FTSE as I'd have to manually align trading days/ holidays (unless some clever chap/ chappess knows a way of auto sorting dates in excel so they'd match)

As a measure of volatility I used Larry William's Vix Fix.

This calculation aims to mimic the VIX so it's particularly useful for markets that the VIX does not related to such as the FTSE. Calculation and notes are all in William's article. 

Here's the Vix fix on the FTSE 100. It's not perfect, but it appears to spike in the right places.Williams uses a 20/ 22 day lookback period hence why the value goes to near zero sometimes when the VIX does not. 

I've done some analysis on the FTSE 100 splitting the VIX Fix levels into quartiles but need to double check the data as there are some important conclusions.

The VIX Fix could be a useful volatility proxy for any market. I've put the calc in a spreadsheet here with the data from the FTSE 100:

Download VixFix

Comments

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