Why a VIX Spike Causes Bids for Stocks to Disappear
The VIX, or volatility index, is a valuable indicator of stress within capital markets. When the index spikes, bids for stocks are dropped, which can cause prices to plummet overnight. When a geopolitical crisis causes higher volatility, there are few buyers anymore looking to bid for value stocks on weakness. As a result, the VIX can quickly overwhelm other factors and lead to abrupt declines in the major stock indexes.