Citi: VIX Is Not Well Understood

The VIX is meant to measure volatility in the S&P 500 (INDEXSP:.INX), and with domestic political risk a lot higher than most people imagined would be possible, it’s being tossed around as a sign that investors are nervous about the future. But there are other, arguably better, measures of volatility that don’t show the same apprehension and are being ignored by pundits. Citi analyst Tobias Levkovich thinks that’s because the VIX is easier to wrap your head around, even if your conclusions are wrong.

“It is disappointing that so many investors discuss the VIX and accept the notion of its signaling prowess even when the back tests imply otherwise,” he writes. “Investors have...