On occurred. A crisis which started soon after

             On October of 2008
another global financial crisis occurred. A crisis which started soon after the
bankruptcy of Lehman on September of 2008. Another interesting phenomenon is
that the index is quite volatile with many peaks. Some indicative dates are,
early 1991 when U.S.A forces attacked Iraq and mid-1990 when Iraq invaded
Kuwait. Then two sharp spikes occurred on October of 1997 and 1998. On 1997 occurred
a sell-off which resulted in the drop of 555 points of Dow (Whaley, 2008). The
1998 spike occurred in a period of general anxiety. Investors were afraid of a
possible drop in the prices and wanted to secure their investments. On 2001 and
2002 happened two other spikes, 2001 was because of Enron bankruptcy and 2002
was because many internet companies bankrupt (e.g Webvan, Exodus Communications,
and Pets.com). Another spike started at the end of 2009 and mainly on 2010, the
“European crisis” as it has been characterized. A crisis caused because of the failure
of many European countries to recompense or refinance their government debt or
even to bail out banks with great debt under their national supervision without
the help of third organisms like other Eurozone countries, the International Monetary
Fund (IMF), or the European Central Bank (ECB). Furthermore, on September of
2011, happened a sharp drop in stock prices of stock exchanges across the
United States, Middle East, Europe and Asia. This was because of worries of contagion
of the European sovereign debt crisis to Spain and Italy, as well as worries over
France’s credit rating downgrade. Of course, in the aftermath of each spike,
the VIX index returns to normal levels.

 Finally, it is worth to be mentioned that although
the weekly closing levels of S 500 and VIX appear to move on opposite
directions, there are also times when an increase in stock prices is go together
with an increase in volatility. Characteristic examples of such cases are those
of January 1999 when the VIX was rising while the level of S 500 was
rising as well. The same pattern appears in early 1995 the June and July of
1997 and December of 1999. Those examples make it clear that investors can
became worried even when market is going well. Something like that can became
clear since the correlation, between the closing prices of S 500 and VIX,
is about -0,7.

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