Question
Another way to understand stock market risk is to examine how investors expect risk to evolve in the near future. The DJIA volatility index (FRED
Another way to understand stock market risk is to examine how investors expect risk to evolve in the near future. The DJIA volatility index (FRED code: VXDCLS) is one such measure. Plot the level of this volatility index since October 1997 and as a second line, the percent change from a year ago of the S&P 500 index (FRED code: SP500). Compare their patterns. (Hint: Using the figure from Data Exploration question 1, select Add Data Series and input VXDCLS in the search box. Select Copy to All Lines to start the date range when the volatility index becomes available (1997). Set the Units dropdown box to Percent (to show the volatility index level) and select Redraw Graph.)
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