KOSPI and volatility index rise together; checking the definition of a melt-up
A melt-up is a phenomenon in which asset prices surge over a short period because of overheated investor expectations and positioning, without an improvement in fundamentals. In recent stock markets, some observers view the simultaneous rise in the KOSPI and the volatility index (VKOSPI) as a melt-up phase.
A melt-up is a phenomenon in which asset prices surge over a short period, driven more by investor expectations and overheated positioning than by fundamentals. It is a phase in which buying in pursuit of rising prices and FOMO (fear of missing out) drive price gains more than clear improvements in corporate earnings or economic conditions. A meltdown is the opposite concept and refers to a sharp market decline.
Recent financial markets have seen observers interpret the strength of the securities market as a simultaneous rise in the KOSPI and the volatility index (VKOSPI). In such cases, it is noted that price gains are triggered more by investor sentiment and changes in positioning than by improvements in fundamentals. One explanation is that price fluctuations can widen as market participants adjust their positions.
The term melt-up describes overheating over a short period. Factors cited as specific causes include large inflows, increased leverage, and short covering. These factors can push asset prices higher even without improvements in corporate earnings or economic indicators.
Some observers use the term “melt-up” to describe a phase in which the KOSPI and the volatility index rise at the same time. This classification emphasizes that the market is being driven by investor sentiment. The explanation continues that whether a market is in a melt-up is determined by changes in positioning and fund flows.
Sources: 연합인포맥스
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