The time series of risk shocks

In an earlier post, we discussed the differences in risk regime through decomposing the VIx index. 

The time series of risk regimes

We can also do the same for risk shocks, which are measured by changes in the VIX. We use bin analysis based on quantiles to form three groups of risk shocks. 

Again, a simple null hypothesis is that risk shocks occur during periods of market extremes, such as recessions and market turning points, yet we find that the time series of changes in the VIX, or risk shocks, appears more random. 

There is a different market response to risk shocks than to the risk regime; more simply, positive changes in the VIX index are associated with large market downturns, but their clustering differs from what we see in the risk regime.