Regarding the VIX returns represented in Table 1, I do not see how you came up with the VIX returns with VIX >40. I did the same exercise, and while my arithmetic mean for the entire period came out almost identical, I found that the VIX arithmetic mean return when VIX began the period at 40 or above was -10%. I used both calendar months – of which there were only 8 when VIX began the period >=40 – and daily data, where I used 22 trading days as a month (yes..oversampling the data, but was curious to see what it would show.) Both methods showed an arithmetic mean return of about -10%.
Again, I used the VIX starting figure as the ‘state’ variable, as I don’t believe the VIX ending figure would be useful because of lookback issues. Can you please explain how you calculated the VIX returns, and in turn, if there are any knock on effects as to how the returns for the strategies were calculated. Thank you. CF

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