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For example the VXX ETF (https://finance.yahoo.com/quote/VXX) does not track the index exactly (https://finance.yahoo.com/quote/%5EVIX/)

marked as duplicate by D Stanley, Nathan L, Bob Baerker, Pete B., Chris W. Rea Oct 8 '18 at 20:48

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The VIX is an index that is computed from the prices of assets (options) and the time (days to expiration), and is not itself the price of any asset or portfolio of assets. Thus, the VIX is not investable and no ETF can track it.

This is also reflected in the mean-reverting tendency of the VIX, which can only be sustained because it is not investable. The VIX rarely goes below 10, so everyone would want to buy it below 10 and await the inevitable bounce.

Instead, only futures and options on the VIX trade, and they discount the foreseeable part of the move. So at best, an ETF (holding those futures and options) can capture the unforeseeable short-term fluctuations (stochastic component), but will systematically diverge from the VIX.

A similar example is a short-term interest rate like the federal funds rate. It can often have very predictable trends (when the Fed is on a hiking or easing trajectory), but the investable futures discount these trends.

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