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Investors’ Heterogeneity in Beliefs, the VIX Futures Basis, and S&P 500 Index Futures Returns
Author(s) -
Lee HsiuChuan,
Liao TzuHsiang,
Tung PaoYing
Publication year - 2017
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21838
Subject(s) - futures contract , economics , futures market , index (typography) , quantile regression , financial economics , quantile , econometrics , basis risk , capital asset pricing model , computer science , world wide web
This study analyzes the impact of the VIX futures basis on subsequent S&P 500 index futures returns using quantile regression. The results show that the impact varies with return distributions and that the effect is stronger under bad market conditions than under good market conditions. The evidence also shows that the VIX futures basis provides incremental information for the purpose of risk management. Overall, our evidence supports the conclusion that the VIX futures basis and investors’ heterogeneity in beliefs are important factors that affect S&P 500 index futures returns. © 2017 Wiley Periodicals, Inc. Jrl Fut Mark 37:939–960, 2017