Here's How The 'Fear Index' Recovered After 11 Major Crises

The analysts at Credit Suisse recently published their Global Investment Returns Yearbook The Big Picture’s Barry Ritholtz: recently pointed us to it.

One interesting chart shows how the the volatility index — a measure of uncertainty in the stock markets — recovered its crisis-related spikes.

From Credit Suisse:

In the Sourcebook, we identify 11 major spikes in the VIX, each associated with an economic or political crisis. For each crisis, Figure 10 shows the time taken in trading days for the VIX to revert from its peak volatility back to its (then) long-run mean. The longest reversion time was during the credit crunch/Lehman crisis, when it took 232 trading days (11 months). The average time was 106 trading days, or just under five months. Figure 10 also shows the “half-life,” or the time taken to revert half the way back to the mean. The average half-life was just 11 days.

vix

Photo: Credit Suisse

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