Stock Market Indices: Inside the Black Box

The news that a whistleblower contacted U.S. regulators last month about alleged manipulation of the Chicago Board Options Exchange Volatility Index, or VIX, highlights near universal reliance on information that stock market indices provide. While the VIX is not itself a stock market index – it is constructed from the implied volatility of S&P 500 index options – the fact that it is designed to track the expected volatility of another index only reinforces the centrality of indices in the modern economy. Other uses of stock market indices abound: Investors rely on them to evaluate the returns on their investment … Read more