The CBOE EFA ETF Volatility Index (VXEFA) – Gauge for Worldwide Investor Sentiment

The new CBOE EFA ETF Volatility Index (VXEFA) measures the expected volatility of the iShares MSCI EAFE Index Fund (EFA), an exchange traded product (ETP) that offers exposure to developed-market stocks in 22 countries in Europe, Australia, Asia and the Far East, as measured by the MSCI EAFE Index.  The MSCI EAFE Index has data history back to 1969, and is one of the oldest and most popular of all international benchmark indexes. As of May 31st, the top 5 constituent stocks in the MSCI EAFE Index (in terms of % weight in the index) were Nestle (1.83%), HSBC (1.74%), Roche (1.51%), Novartis (1.42%) and Toyota (1.41%).

I have received inquiries about the possibility of CBOE introducing more tools to help investors manage and monitor worldwide volatility, and institutional investors recently specifically requested an EFA-based volatility index.

CBOE has listed options on the EFA ETF since 2002.  On June 26th the EFA options had total open interest of 2,289,535 (with 921,138 call options and 1,368,397 put options).


The VXEFA Index has potential to appeal to investors who like big price movements and negative correlations. The highest daily closing value for the VXEFA Index was 81.02 on Nov. 20, 2008, and its lowest daily closing value was 13.11 on March 15, 2011.  The biggest one-day up moves (in % terms) for the VXEFA Index were: (1) up 51.3% on May 14, 2010, (2) up 41.9% on August 8, 2011, and (3) up 41.3% on November 9, 2011.

In 2008 the VXEFA Index jumped more than 468%, as it rose from 14.26 on May 16, 2008 to 81.02 on Nov. 20, 2008.


In the past week both the VXEFA and VXTYN indexes reached their highest daily closing levels of 2013, indicating that there could be heightened investor anxiety about expected volatility for worldwide stocks and interest rates.

122Correlations VXEFA


As shown in the Correlations chart below, the daily returns for the VXEFA Index had a correlation of negative 0.64 versus the EFA ETF, negative 0.61 versus the S&P 500® Index (SPXTM) in the period from January 3, 2008 through June 20, 2013. Also please see the line chart ABOVE that compares the price movements of the EFA ETF and VXEFA Index.  When the EFA has had big downside moves, the VXEFA often has exploded on the upside.



The VXEFA has some very interesting properties and has potential to be used as a gauge of worldwide market volatility.  As with CBOE’s other volatility indexes, the VXEFA initially is introduced with no accompanying tradable futures and options. If futures and options on VXEFA were introduced in the future (and there are no firms plans to do so right now), they could have the potential to serve as diversification tools for worldwide portfolios.

For more information and data on the VXEFA Index, please visit