{"id":63431,"date":"2017-05-24T14:13:21","date_gmt":"2017-05-24T19:13:21","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=63431"},"modified":"2017-05-24T14:27:54","modified_gmt":"2017-05-24T19:27:54","slug":"vix-volatility-explainer","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/vix-volatility-explainer\/","title":{"rendered":"5 things you need to know about ‘VIX,’ the Volatility Index"},"content":{"rendered":"

By Shen Lu<\/strong><\/p>\n\n

Unlike emotional volatility, volatility in the stock market can be tracked and measured. Here are five basics of the VIX that you need to know.<\/p>\n

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What is the VIX?<\/h2>\n

The Volatility Index, or VIX, \u00a0reflects investors’ expectation of volatility in the Standard & Poor’s 500 Index in the next 30 days. The S&P 500 is a portfolio of large-cap company stocks perceived as a leading indicator of U.S. equities. The VIX was designed by the Chicago Board Options Exchange in 1993 as a way to track volatility, which is one important determinant of stock options prices.<\/p>\n

‘Fear gauge’<\/h2>\n

The VIX is known as the “fear gauge” because it surges whenever uncertainty, or fear, hovers over the market. When volatility spikes sharply, as it did during the European debt crisis and the U.S. financial crisis, investors are fearful and are more likely to sell their stocks. <\/p>\n

\"An
An illustration of the VIX and S&P 500 movements. (Shen Lu\/MEDILL REPORTS)<\/figcaption><\/figure>\n

It was ‘Trumped’ last week<\/h2>\n

Volatility coincides with major economic, financial and political news. When news came last Wednesday that FBI Director James Comey said President Donald Trump had asked him to drop an investigation of former National Security Adviser Michael Flynn, stocks tanked and the VIX spiked. However, the VIX retreated fairly quickly and the market is calm again.
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