Friday, May 7, 2010

Fear and the economy: One look at the VIX speaks a thousand words

The Fear Index: VIX

The VIX is an indicator that measures volatility and fear in the financial markets. The greater the uncertainty in the economy, our society or the world, the higher the volatility index goes.

During "normal" times, the VIX typically moves slightly and stays in a range of between 10 and 20. During the financial and economic panic, it went as high as 80. Recently it had been as low as about 17.

With the bailout of Greece, the accompanying violent protests there, and the expectation that the same problem could impact other European countries like Spain, Portugal, Ireland (the other three members of PIGS) and even the United States, the VIX moved, yesterday alone, from a low of 24.50 to a high of 40 before settling at 32.80.

To read the full story and chart, click here to go to the Homeland Security column at the Examiner.

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