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Woodard: Politics and Market Noise

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fig. 3. 1M Rolling Correlation Between VIX and Romney.2012.Pres returns, 2012
Source: Intrade, Yahoo!, Condor Options

 

Finally, option implied volatility also debunks the idea that the market has been responding carefully to changing electoral conditions. Changes in the Romney contract have had no consistent or meaningful relationship to the CBOE Volatility Index (VIX), whether looking at VIX returns or absolute VIX levels.

When journalistic storytelling becomes a little overzealous, financial analysts are bound to remind everyone that correlation does not entail causation; but in the case of Governor Romney's electoral hopes and stock returns, we don't even have evidence of any meaningful correlation.

OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.

Jared can be followed on Twitter at twitter.com/CondorOptions.

 

 

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At the time of publication, Jared Woodard held no positions in the stocks or issues mentioned.


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