Wed, March 14, 2012
Volatility Research sole purpose has been to "crack the VIX volatility code." We are pleasantly surprised that our VXX daily forecasts of VXX next-day close have done so well this year.
Our scorecard so far this year is better than we expected, even though our algorithm was optimized to predict VXX gains, not losses, late last year (Sep-Dec) in a period of much higher volatility (see charts 4,5,6) than now:
THEORY* We are unable to explain why our forecasts this year are far more right than wrong. We know we should be in murky waters using historical data to forecast this year's VXX price movements. Our only possible explanation now is this:
Its one theory we can't prove, other than "it seems to be working."
We are not aware of any other forecasts that have done this well. We hope that everyone interested in VIX volatility can benefit from our forecasts — and they're FREE! Just bookmark this page for our latest.
* CORRECTION: A previous version of our Theory implied we were using only historical data from last year. We are using historical data from each previous day through last year.