PE to VIX Ratio = Market Emotion?

I hadn’t come across this idea before, its a few years old but interesting.

From Arrow Capital:

PE/VIX = market emotion: lately drifting in and out of complacency
We define 5 categories of market emotion gauged by  PE/VIX:

1) Crash – very high VIX and low PE,

2) Skeptical/Denial – VIX elevated and PE still low,

3) Realistic/Disciplined – Both PE and VIX within normal ranges,

4) Complacency – low VIX or high PE or both,

5) Mania – very high PE and low VIX.

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