From the name, the volatility index is an index to calculate the volatility of a market, but this "volatility" can be equated with "panic".
On the historic Black Monday, 1987, 10, 19, the global stock market collapsed under the leadership of US stocks, which subsequently led to the global economic recession.
The stock market plunged by 23% on Monday, and the terrible market fluctuation attracted everyone's attention, so the fluctuation began to become an important indicator of the financial market.
It was not until 1993 that the Chicago Board Options Futures Exchange launched the VIX index, the purpose of which was to give an early warning of the upcoming stock market crash.
In fact, why can volatility be used to warn market risks?
Simply put, when everyone is moving towards the same goal, the inner waves will not be great, because the goals are firm and consistent, optimistic about the stock market and optimistic about the economy.
However, if some people start to waver and their goals are no longer firm, they will fight with others and cause great fluctuations.
For example, when discussing a problem, if everyone agrees, there won't be many arguments, and the problem can be easily solved unanimously.
But if someone disagrees, the seminar will become very noisy, and no one will compromise or even fight.
This is the role of volatility, which not only represents the views of most people in the market on future index fluctuations, but also represents the psychological changes of most people in the market.
This is why fluctuation can be equated with panic, because the greater the fluctuation, the more afraid and uneasy everyone is.
When more and more people are afraid of anxiety, the volatility of market transactions will increase.
The fluctuation will not return to calm until everyone's goals are consistent again.
Since its appearance, the panic index has soared many times during the economic crisis and stock market crash, especially during the economic crisis.
1998 during the Asian financial turmoil, it soared to the second highest point, and in 2008, the subprime mortgage crisis soared to the highest point in history.
Thus, this index has become the God Prediction Index.