If the Contrarians Are at the Gate, They May Just Be Lost

There is some reading about VIX in The New York Times:

If the Contrarians Are at the Gate, They May Just Be Lost
The New York Times
By Mark Hulbert
Published: August 21, 2005

The VIX currently stands at 13.42, which is lower than about 79 percent of the index's past readings. Its historical range extends from a low of 9.31 in December 1993, to a high of 45.74 in October 1998.

The exchange refers to the VIX as an "investor fear gauge," and the index quickly found a following among a group of market timers known as contrarians. They believe that the stock market rarely moves in the direction that the majority expects; therefore, they are bullish for the overall market when the VIX is high and indicating widespread investor fear. By the same token, they are bearish when, like today, the VIX is low and betraying investor complacency.

Researchers, however, have been able to find only partial historical support at best for this interpretation of the VIX. According to a recent Hulbert Financial Digest study, the stock market has indeed tended to turn in an above-average performance following very high VIX readings - just as contrarians say. But contrary to what contrarians believe, the stock market has also produced above-average returns following very low readings.

Read further:
The New York Times: If the Contrarians Are at the Gate, They May Just Be Lost

See also:
Raising Volatility
VIX conundrum
Low Market Volatility