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VIX versus Size

Maggie Copeland and Thomas Copeland
The Journal of Portfolio Management Spring 2016, 42 (3) 76-83; DOI: https://doi.org/10.3905/jpm.2016.42.3.076
Maggie Copeland
is co-founder of Copeland Valuation Consultants, LLC in San Diego, CA.
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  • For correspondence: copelandvaluation@gmail.com
Thomas Copeland
is a professor of finance in the School of Business Administration at the University of San Diego in San Diego, CA.
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  • For correspondence: tcopeland@sandiego.edu
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Abstract

VIX (CBOE Volatility Index) is often called the “fear index.” Using monthly returns from January 2000 to December 2011 as their data sample, the authors find that when the change in VIX is positive, large-capitalization stocks (the S&P 500) outperform small-capitalization stocks (the S&P 600); and when the change in VIX is negative, small-cap stocks outperform. Furthermore, the statistical significance of the change in VIX is substantially greater than SIZE (the natural logarithm of the market capitalization). The authors argue that the benefit of owning a small-cap stock depends on the distribution of the change in VIX in any given period. During the period July 2007–March 2009, both levels of the large-cap index (S&P 500) and the small-cap index (S&P 600) had a maximum drawdown over 50%, and the small-cap suffered much more than the large-cap. This huge drawdown demonstrates the importance of the effect of VIX on the cross section of stock returns

TOPICS: In markets, statistical methods

  • © 2016 Pageant Media Ltd
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The Journal of Portfolio Management: 42 (3)
The Journal of Portfolio Management
Vol. 42, Issue 3
Spring 2016
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VIX versus Size
Maggie Copeland, Thomas Copeland
The Journal of Portfolio Management Apr 2016, 42 (3) 76-83; DOI: 10.3905/jpm.2016.42.3.076

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VIX versus Size
Maggie Copeland, Thomas Copeland
The Journal of Portfolio Management Apr 2016, 42 (3) 76-83; DOI: 10.3905/jpm.2016.42.3.076
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  • Article
    • Abstract
    • LITERATURE REVIEW OF THE SMALL FIRM EFFECT
    • DATA SAMPLE
    • EXPERIMENTAL DESIGN AND RESULTS
    • WHY ΔVIX?
    • CONCLUSIONS
    • ENDNOTES
    • REFERENCES
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