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The Chicago Board Options Exchange's Market Volatility Index (VIX) is called the “investor fear gauge.” To understand why, it is necessary to understand the index's construction. To understand how VIX performs its role, it is necessary to examine its history and its relation to stock market returns. In this article, the author describes the construction of the volatility index and examines in movements over the past fourteen years.
Robert E. Whaley (Sun,) studied this question.