Adjust CML model for VIX factor
I’m trying to incorporate the VIX index into my efficient frontier model. One way of doing this that I thought about was to extend the model to include investor utility indifference curves. I would then add a simple if/then condition to determine the coefficient in the utility indifference equation based on the position of the VIX index. But I think that this is too rudimentary. I also think that there has to be a more practical way to guide my portfolio strategy than utility curves.
Is there a better, more systematic way of incorporating the VIX index into my CML model?