Archived IMT (2009.05.19)

Much talk about the VIX breaking below 30 for the first time since the week of Lehmans downfall. Although the inverse relation between the VIX and equities is well documented, it is worth noting a few changes. The VIX rose to only 52 when stocks tumbled to 12-year lows in the first week of March, compared to a record high of 90 (some measures at 93) in late October, when stocks were at a 5-year lows. This means that despite deeper lows in equities 2.5 months ago, the element of fear and volatility was less pronounced than it was in October-November. Thus, selling can be present without panic, as it undertakes the form of speculative shorts (March) rather than panic redemptions (October).