Wall Street’s so-called fear gauge was “manipulated,” a new federal class action lawsuit alleges.
The CBOE Volatility Index (), known as the VIX, has been hotly debated since the stock market plunged last month. The VIX is a real-time predictor of how much the S&P 500 will fluctuate over the 30 days that follow.
Betting on market calm had paid off for investors as stocks went on a tear in 2017, but it backfired last month when volatility seized Wall Street.
The Dow tanked 1,175 points on February 5, sending the VIX skyrocketing a record 116% that day. Inverse volatility funds, which trade opposite to the VIX, fell dramatically. Some market analysts argued those bad bets drove the VIX higher and stocks lower than they otherwise would have been.