No Result
View All Result
SUBMIT YOUR ARTICLES
  • Login
Thursday, October 23, 2025
TheAdviserMagazine.com
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal
No Result
View All Result
TheAdviserMagazine.com
No Result
View All Result
Home Market Research Investing

Volatility Signals: Do Equities Forecast Bonds?

by TheAdviserMagazine
3 months ago
in Investing
Reading Time: 3 mins read
A A
Volatility Signals: Do Equities Forecast Bonds?
Share on FacebookShare on TwitterShare on LInkedIn


Surprise, surprise. Contrary to conventional wisdom, the bond market may be taking its risk cues from equities. At least, that appears to be the case when fluctuations in the two major volatility indices are compared.

Equity investors often look to the CBOE Volatility Index (VIX) as a gauge of fear or future uncertainty in the stock market. Meanwhile, fixed-income investors rely on the Merrill Lynch Option Volatility Estimate (MOVE Index) to track expectations of future volatility in the bond market. But which market sets the tone for the other? Does one of these volatility measures lead the other, or are they simply reacting to distinct sources of risk within their own domains?

Challenging Assumptions: Evidence That Equities Lead Bond

To answer that question, we examined how the VIX and MOVE indices have interacted over time, using daily data going back to 2003.

Our analysis revealed a surprising result: while fluctuations in the MOVE index do not predict movements in the VIX, changes in the VIX do help forecast future moves in the MOVE index.

This flips conventional wisdom. Investors often assume that the bond market, with its sensitivity to interest rate expectations and macroeconomic signals, sets the tone for equities. But at least when it comes to market-implied future uncertainty, the relationship appears reversed: the bond market is taking its cues from stocks.

To explore this, we looked at how the two indices behave together. Over the last 20 years, they’ve generally moved in tandem, particularly during periods of macroeconomic stress, with a 30-day rolling correlation that averaged around 0.59. But correlation isn’t causation. To test for a predictive relationship, we used Granger causality analysis, which helps determine whether one time series improves forecasts of another. In our case, the answer was clear: the VIX leads.

Market Stress and Temporary Bond Leadership

Interestingly, the pattern shifts during periods of elevated stress. When both the VIX and MOVE indices spike above their 75th percentile levels, indicating a high-volatility period, we observe a reversal: the MOVE index shows some predictive power over the VIX. In these moments, equities appear to take cues from bonds. While rare, this exception suggests that in times of acute uncertainty, the usual flow of information between markets can briefly reverse.

One way to interpret these results is that because the MOVE index seems to take the lead during periods of extreme uncertainty, bond managers are more attune to huge macro shifts in the economy and capture big sentiment shifts better than equity managers (i.e., when we go from positive to negative momentum).

Implications for Multi-Asset and Hedging Strategies

These findings may have the most impact not for investors that invest solely in one asset, but more so for investors that are spread across various asset classes. The results highlight that for multi-asset managers, when it comes to assessing fear in the market, it may be best to pay attention to the bond market when big moves in fear or uncertainty become apparent. But when dealing with small movements in the perception of future uncertainty, the stock market may surprisingly be the better measure of risk to track.

These results also have strong implications for investors who are not in the equity market or the debt market, yet use them to hedge risk. If a commodities trader is looking for early signs of big moves in the equity market or bond market to get out of commodities, they may want to shift their attention between the VIX and the MOVE indices as regimes move.

These findings challenge a long-standing assumption: that the bond market always leads. At least when it comes to measuring future uncertainty, equities seem to set the tone, except, notably, in the most volatile moments, when bonds regain their influence. It appears that, in general, the bond market is looking more to the equity market for future assessments of risk rather than the other way around. These results merit further study, not just into which market is leading the other, but how this spillover of uncertainty travels between them.



Source link

Tags: bondsequitiesforecastSignalsvolatility
ShareTweetShare
Previous Post

Earnings Preview: What to look for when Intel (INTC) reports Q2 results

Next Post

8 Times Saying “Yes” to Family Ruined a Retirement

Related Posts

edit post
2025 Healthcare Stocks List | Updated Daily

2025 Healthcare Stocks List | Updated Daily

by TheAdviserMagazine
October 23, 2025
0

Article updated on October 23rd, 2025 by Bob CiuraConstituents updated annually The healthcare sector is home to some of the...

edit post
Virtual Staging Tech is So Good Now That It’s Earning Flippers and Investors More Money

Virtual Staging Tech is So Good Now That It’s Earning Flippers and Investors More Money

by TheAdviserMagazine
October 22, 2025
0

In This Article Virtual staging, once a real estate novelty, has unfurled like a magic carpet over the investment landscape,...

edit post
2025 Technology Sector Stocks List

2025 Technology Sector Stocks List

by TheAdviserMagazine
October 22, 2025
0

Updated on October 22nd, 2025 by Bob Ciura Spreadsheet data updated daily The technology industry is one of the most...

edit post
LDI in Frontier Markets: Building Resilience, the Nigeria Case Study

LDI in Frontier Markets: Building Resilience, the Nigeria Case Study

by TheAdviserMagazine
October 22, 2025
0

Liability-Driven Investing (LDI) is often associated with developed markets, where deep liquidity and a wide range of derivatives allow investors...

edit post
How to Reach Financial Freedom Faster with “Slow and Steady” Investing

How to Reach Financial Freedom Faster with “Slow and Steady” Investing

by TheAdviserMagazine
October 22, 2025
0

Does real estate investing feel like more work than it’s worth? It doesn’t have to! Today’s guest would hustle from...

edit post
10 High Dividend Stocks Trading Near 52 Week Lows

10 High Dividend Stocks Trading Near 52 Week Lows

by TheAdviserMagazine
October 21, 2025
0

Published on October 21st, 2025 by Bob Ciura The average dividend yield in the S&P 500 Index remains low at...

Next Post
edit post
8 Times Saying “Yes” to Family Ruined a Retirement

8 Times Saying “Yes” to Family Ruined a Retirement

edit post
GoPro, Krispy Kreme join the meme party as Wall Street speculation ramps up

GoPro, Krispy Kreme join the meme party as Wall Street speculation ramps up

  • Trending
  • Comments
  • Latest
edit post
77-year-old popular furniture retailer closes store locations

77-year-old popular furniture retailer closes store locations

October 18, 2025
edit post
Pennsylvania House of Representatives Rejects Update to Child Custody Laws

Pennsylvania House of Representatives Rejects Update to Child Custody Laws

October 7, 2025
edit post
What to Do When a Loved One Dies in North Carolina

What to Do When a Loved One Dies in North Carolina

October 8, 2025
edit post
Probate vs. Non-Probate Assets: What’s the Difference?

Probate vs. Non-Probate Assets: What’s the Difference?

October 17, 2025
edit post
California Attorney Pleads Guilty For Role In 2M Ponzi Scheme

California Attorney Pleads Guilty For Role In $912M Ponzi Scheme

October 15, 2025
edit post
Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

Baby Boomers Are Flocking to This Florida Town — but Not for the Weather

October 9, 2025
edit post
Kim Kardashian invests in micro-drama platform GammaTime

Kim Kardashian invests in micro-drama platform GammaTime

0
edit post
What We’re Buying During This Real Estate Correction

What We’re Buying During This Real Estate Correction

0
edit post
Wall Street Remains Bullish on Carvana Co (CVNA)

Wall Street Remains Bullish on Carvana Co (CVNA)

0
edit post
2025 Healthcare Stocks List | Updated Daily

2025 Healthcare Stocks List | Updated Daily

0
edit post
Post-Pandemic Inflation In Canada | Armstrong Economics

Post-Pandemic Inflation In Canada | Armstrong Economics

0
edit post
Glassnode identifies concentrated Bitcoin selling amid market consolidation

Glassnode identifies concentrated Bitcoin selling amid market consolidation

0
edit post
Glassnode identifies concentrated Bitcoin selling amid market consolidation

Glassnode identifies concentrated Bitcoin selling amid market consolidation

October 23, 2025
edit post
NYC mayoral candidates turn on each other in final debate: ‘Zohran, your resume could fit on a cocktail napkin. And, Andrew, your failures could fill a public school library in New York City’

NYC mayoral candidates turn on each other in final debate: ‘Zohran, your resume could fit on a cocktail napkin. And, Andrew, your failures could fill a public school library in New York City’

October 23, 2025
edit post
Why The Smartest Are Not The Richest

Why The Smartest Are Not The Richest

October 23, 2025
edit post
Corporate debt surge: Commercial paper issuances hit highest since April

Corporate debt surge: Commercial paper issuances hit highest since April

October 23, 2025
edit post
Kim Kardashian invests in micro-drama platform GammaTime

Kim Kardashian invests in micro-drama platform GammaTime

October 23, 2025
edit post
UK startup Mondra lands €11.4M to help food industry manage climate and supply chain volatility

UK startup Mondra lands €11.4M to help food industry manage climate and supply chain volatility

October 23, 2025
The Adviser Magazine

The first and only national digital and print magazine that connects individuals, families, and businesses to Fee-Only financial advisers, accountants, attorneys and college guidance counselors.

CATEGORIES

  • 401k Plans
  • Business
  • College
  • Cryptocurrency
  • Economy
  • Estate Plans
  • Financial Planning
  • Investing
  • IRS & Taxes
  • Legal
  • Market Analysis
  • Markets
  • Medicare
  • Money
  • Personal Finance
  • Social Security
  • Startups
  • Stock Market
  • Trading

LATEST UPDATES

  • Glassnode identifies concentrated Bitcoin selling amid market consolidation
  • NYC mayoral candidates turn on each other in final debate: ‘Zohran, your resume could fit on a cocktail napkin. And, Andrew, your failures could fill a public school library in New York City’
  • Why The Smartest Are Not The Richest
  • Our Great Privacy Policy
  • Terms of Use, Legal Notices & Disclosures
  • Contact us
  • About Us

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • Financial Planning
    • Financial Planning
    • Personal Finance
  • Market Research
    • Business
    • Investing
    • Money
    • Economy
    • Markets
    • Stocks
    • Trading
  • 401k Plans
  • College
  • IRS & Taxes
  • Estate Plans
  • Social Security
  • Medicare
  • Legal

© Copyright 2024 All Rights Reserved
See articles for original source and related links to external sites.