Misreading misleading headlines: VIX edition

February 13, 2012 in Finance

I was shocked to see the following bold headline this morning, as it describes something which did not actually happen:

CBOE 'fear guage' drops 6% in Monday trading

Let's be clear: the VIX is measured in percentage points. A 6% drop in the VIX is very significant, as it represents a 6 point drop in the index level. The drop referenced here was just 1.2 points from yesterday's 20.79 close -- so if the VIX was a stock (or something not measured in percents), it would be accurate to say there was a 6%. But the VIX is measured and expressed in percent, so the change is simply 1.2%. The headline was written either to mislead investors or by someone who doesn't understand the first thing about the numbers they've been tasked with writing about.

How ironic that a headline about the "fear index" is itself sensational! As an investor who looks to sites like MarketWatch for news, I find this absolutely unacceptable -- and it reinforces my (sad) belief that you must always do your own research, and you should never trust anything that anyone tells you.

Even worse, this isn't the first time I've used a "Misreading misleading...: VIX edition" headline. This index is ripe for information manipulation.

(Also, what's with the Facebook "like" button for tickers? Seriously? )

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