Comments on: Is the S&P 500 30% undervalued? http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Wed, 17 Mar 2010 21:28:31 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: Aaron http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2514 Aaron Fri, 03 Aug 2007 05:11:36 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2514 Very interesting article. This article looks at the relationship between the VIX and the S&P like I have never seen before. This is almost a contrarian article of a contrarian thought, pretty neat. Very interesting article. This article looks at the relationship between the VIX and the S&P like I have never seen before. This is almost a contrarian article of a contrarian thought, pretty neat.

]]> By: F http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2494 F Thu, 02 Aug 2007 19:52:30 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2494 Fascinating stuff. I think your regression in the first graph (VIX vs S&P 500) is being heavily skewed by your outlier at +300%. I would remove it and see how much it changes, because I think this will make a big difference. Also, technically such a direct linear correlation is impossible. Since the S&P 500 has increased consistently over time, the VIX would need to decrease consistently over time. Which is why your subsequent model is much better in terms of fit. Finally, I'm not getting your derivation of a. When I do it I get a bunch of lns in there. Anyway, thanks for putting this out there. Fascinating stuff. I think your regression in the first graph (VIX vs S&P 500) is being heavily skewed by your outlier at +300%. I would remove it and see how much it changes, because I think this will make a big difference.

Also, technically such a direct linear correlation is impossible. Since the S&P 500 has increased consistently over time, the VIX would need to decrease consistently over time. Which is why your subsequent model is much better in terms of fit.

Finally, I’m not getting your derivation of a. When I do it I get a bunch of lns in there.

Anyway, thanks for putting this out there.

]]> By: Michael http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2465 Michael Wed, 01 Aug 2007 20:06:33 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2465 Hi, Great great great article! I'm a student writing a paper on just this topic, such a coincidence! My friend told me about you blog. Thanks! However I only though about it (VIX, P/E, S&P500, ...) about two weeks ago and the (luckily short) paper is due the 20th. It's for statistics. I'm going to contact you (who? author?) via email (maybe we could help each other out, email graphs and the mathimatical stuff that most people don't get - sorry guys)! Oh, and sorry if there are any spelling mistakes and stuff. I'm excited. Greetings from Belgium! Hi,

Great great great article! I’m a student writing a paper on just this topic, such a coincidence! My friend told me about you blog. Thanks!

However I only though about it (VIX, P/E, S&P500, …) about two weeks ago and the (luckily short) paper is due the 20th. It’s for statistics. I’m going to contact you (who? author?) via email (maybe we could help each other out, email graphs and the mathimatical stuff that most people don’t get – sorry guys)!

Oh, and sorry if there are any spelling mistakes and stuff. I’m excited.

Greetings from Belgium!

]]> By: Jeff http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2463 Jeff Wed, 01 Aug 2007 18:39:09 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2463 Note for wonks: I estimated the mean reversion level (which is very close to the historic mean, no surprise) by regressing the one-day lagged Old VIX on the Old VIX itself. If you want how the math works on that, I can provide it, but it will make most readers go “huh?” I'd like to see this math, please, in an effort to replicate it on my end. Note for wonks: I estimated the mean reversion level (which is very close to the historic mean, no surprise) by regressing the one-day lagged Old VIX on the Old VIX itself. If you want how the math works on that, I can provide it, but it will make most readers go “huh?”

I’d like to see this math, please, in an effort to replicate it on my end.

]]> By: Bill Luby http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2462 Bill Luby Wed, 01 Aug 2007 18:37:30 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2462 Excellent work, David. Lots of things to ponder in here, though I can't seem to get the graphics to load for me. Ironically, I posted something similar to some of your work yesterday: http://vixandmore.blogspot.com/2007/07/spxvix-ratio-mean-reversion-magnet-and.html Needless to say, I am eagerly anticipating the next installment. Cheers, -Bill Excellent work, David. Lots of things to ponder in here, though I can’t seem to get the graphics to load for me.

Ironically, I posted something similar to some of your work yesterday: http://vixandmore.blogspot.com/2007/07/spxvix-ratio-mean-reversion-magnet-and.html

Needless to say, I am eagerly anticipating the next installment.

Cheers,

-Bill

]]> By: Jeff http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2461 Jeff Wed, 01 Aug 2007 18:35:42 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2461 I just discovered that clicking on your pictures results in an error. They won't enlarge as the link won't engage. Any way you can fix this? I just discovered that clicking on your pictures results in an error. They won’t enlarge as the link won’t engage. Any way you can fix this?

]]> By: Jeff http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/comment-page-1/#comment-2460 Jeff Wed, 01 Aug 2007 18:34:23 +0000 http://alephblog.com/2007/07/31/is-the-sp-500-30-undervalued/#comment-2460 Being in a firm that trades VIX regularly and builds quant models in-house, I would love to read more studies on what you've discovered in how to trade the VIX or build models using the VIX as a signal to picking sectors to be in. Great blog, by the way. I'm a daily reader! Being in a firm that trades VIX regularly and builds quant models in-house, I would love to read more studies on what you’ve discovered in how to trade the VIX or build models using the VIX as a signal to picking sectors to be in.

Great blog, by the way. I’m a daily reader!

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