It is calculated from the (theoretical) implied volatility of listed S&P options, so it is indeed forward looking (not past variance).
But it is riddled with microstructural issues and to my knowledge doesn't really have any track record of predicting crashes. It will react to market events contemporaneously though, so it is a decent measure of expected future volatility.
Besides household debt, the rest of these indicators don't make much sense either. Much better would be measures of the yield curve, inflation, and corporate credit quality.
But it is riddled with microstructural issues and to my knowledge doesn't really have any track record of predicting crashes. It will react to market events contemporaneously though, so it is a decent measure of expected future volatility.
Besides household debt, the rest of these indicators don't make much sense either. Much better would be measures of the yield curve, inflation, and corporate credit quality.