VIX forecast — where the fear gauge drifts back to

The VIX is Wall Street's fear gauge: how much movement the options market expects in the S&P 500 over the coming month. It does not trend the way a stock price does — it spikes in a panic and sags in a calm, and in between it keeps returning to a normal level. So all three of our VIX models are mean-reverting: they assume an unusually high or low reading tends to drift back toward normal.

The three differ in what they let influence the path back. The default is a plain mean-reversion model (Ornstein-Uhlenbeck). The second also lets the last few days' direction carry into the near-term path. The third fits a separate 'normal' level for calm, ordinary and stressed markets, on the view that what counts as normal changes with conditions. All three are fitted on the daily closing VIX published by the US Federal Reserve's FRED database, and all three draw their random shocks by resampling the VIX's own past surprises, so that rare, violent spikes stay possible in the forecast instead of being smoothed away.

Current VIX: 15.84 (Normal). The level the model treats as normal for the VIX, fitted from its history: 18.3. From an extreme reading, the model expects roughly 8.5 days to close half the gap back to that normal level. Figures reflect the default mean-reversion model at the 3-month horizon; the interactive page also lets you switch horizon (3/6/12 months) and model.

Frequently asked questions

How is the VIX forecast built?

With a mean-reversion model: one that assumes an unusually calm or panicky reading tends to drift back toward normal. It is fitted on the daily closing VIX published by the US Federal Reserve's FRED database, and it draws its random shocks by resampling the VIX's own past surprises, so rare violent spikes stay possible. The fit tells us two things: the level the model treats as normal, and roughly how many days it takes to close half the gap back to it. Educational research; not investment advice.

Why assume the VIX returns to normal instead of trending?

Because that is what it does. The VIX is Wall Street's fear gauge, and fear is not a trend — it spikes in a panic and fades in a calm, coming back to an ordinary level in between. It does not climb year after year the way a stock index can. A model that expects the return to normal fits that behaviour far better than one that expects a trend.

Can I choose a different VIX forecasting model?

Yes — the page offers three, and all three expect extremes to fade. The default is a plain mean-reversion model (Ornstein-Uhlenbeck). The second also lets the last few days' direction carry into the near-term path. The third fits a separate 'normal' level for calm, ordinary and stressed markets, on the view that what counts as normal changes with conditions.

Educational research only — not investment advice.