Matt Miller, BFA™, CFP®, MPSY
Executive Vice President, New Disruptions

Executive Summary

There is no fear in the market, only anxiety. The popular CBOE Volatility Index (VIX) should no longer be called the “Fear Index” and instead should more accurately be described as the “Anxiety Index.” The distinction between fear and anxiety is an important one because our brains do not equip us with cognitive tools which can adequately separate the two in a meaningful way. Research shows that the human brain thinks by emotion first and rationale second, and the hierarchy negatively affects investor’s rates of return. Furthermore, we provide evidence that individual investors significantly underperform their benchmark in aggregate, and propose that creating a rules-based system to replace emotional decision-making is the best way to increase a probability for reaching any desired result. Algorithms have been around for thousands of years, and we show that they are the best candidate for modern utility when creating a rules-based investment strategy.

Check out the full article from our research team, Helios Quantitative, below.