VIX Spike Characteristics as Predictors of Short-Term SPY Reversion: Evidence from 47 Events, 2004–2026

This study examines whether VIX spike characteristics — cause, magnitude, and absolute level — predict short-term SPY reversion. Starting from 82 single-day VIX spikes of 5 or more absolute points identified from 2004 to 2026, a minimum-separation filter collapses clustered events within 7 trading days into single independent observations, yielding a final sample of 47 events. Each event is classified by cause (Federal Reserve policy, macroeconomic data, geopolitical, corporate, or unknown) and spike tier (Moderate: 5–10 points, Significant: 10–20 points, Severe: 20+ points). Forward SPY returns are measured at 1, 3, 5, and 7 trading days and evaluated against a drift-adjusted baseline derived from SPY's 8.95% annualized return over the study period. One-sample t-tests are applied across 32 subgroup comparisons, with Benjamini-Hochberg false discovery rate correction at FDR=5%. Overall reversion is statistically significant at T+1, T+5, and T+7 (p=0.003, 0.004, and <0.001 respectively). Significant-tier spikes (n=12) show mean excess returns of +4.08% and +4.33% at T+5 and T+7, with 91.7% of events beating the drift baseline at both windows. Geopolitical events (n=14) show 78.6% beat-drift rates at T+5 (p=0.010), a signal that persists after controlling for spike magnitude. Events where VIX closed above 30 show significant reversion at T+1, T+5, and T+7 after correction. These findings suggest that cause, magnitude, and VIX level together determine whether a spike reflects a panic-driven overshoot or a calibrated repricing of risk.

Authors

Publication Details

Journal
Zenodo (CERN European Organization for Nuclear Research)
Published
2026-09-12
DOI
https://doi.org/10.5281/zenodo.22726940
Primary Topic
Financial Markets and Investment Strategies
Type
preprint
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preprint

VIX Spike Characteristics as Predictors of Short-Term SPY Reversion: Evidence from 47 Events, 2004–2026

Rachit Bordia
Zenodo (CERN European Organization for Nuclear Research)
Financial Markets and Investment Strategies
preprint

VIX Spike Characteristics as Predictors of Short-Term SPY Reversion: Evidence from 47 Events, 2004–2026

Rachit Bordia
preprint en

Abstract

This study examines whether VIX spike characteristics — cause, magnitude, and absolute level — predict short-term SPY reversion. Starting from 82 single-day VIX spikes of 5 or more absolute points identified from 2004 to 2026, a minimum-separation filter collapses clustered events within 7 trading days into single independent observations, yielding a final sample of 47 events. Each event is classified by cause (Federal Reserve policy, macroeconomic data, geopolitical, corporate, or unknown) and spike tier (Moderate: 5–10 points, Significant: 10–20 points, Severe: 20+ points). Forward SPY returns are measured at 1, 3, 5, and 7 trading days and evaluated against a drift-adjusted baseline derived from SPY's 8.95% annualized return over the study period. One-sample t-tests are applied across 32 subgroup comparisons, with Benjamini-Hochberg false discovery rate correction at FDR=5%. Overall reversion is statistically significant at T+1, T+5, and T+7 (p=0.003, 0.004, and <0.001 respectively). Significant-tier spikes (n=12) show mean excess returns of +4.08% and +4.33% at T+5 and T+7, with 91.7% of events beating the drift baseline at both windows. Geopolitical events (n=14) show 78.6% beat-drift rates at T+5 (p=0.010), a signal that persists after controlling for spike magnitude. Events where VIX closed above 30 show significant reversion at T+1, T+5, and T+7 after correction. These findings suggest that cause, magnitude, and VIX level together determine whether a spike reflects a panic-driven overshoot or a calibrated repricing of risk.

Zenodo (CERN European Organization for Nuclear Research)
Peace, Justice and strong institutions
Financial Markets and Investment Strategies
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