Florian Auinger highlights the core weaknesses and sources of criticism regarding the VIX Index
as an indicator for the future development of financial market volatility. Furthermore it is
proven that there is no statistically significant causal relationship between the VIX and the
S&P 500. As a consequence the forecastability is not given in both directions. Obviously
there must be at least one additional variable that has a strong influence on market volatility
such as emotions which according to financial market experts are considered to play a more
and more important role in investment decisions.
