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Dynamics and determinants of spillovers across the option-implied volatilities of US equities

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  • Bouri, Elie
  • Lucey, Brian
  • Roubaud, David

Abstract

We study the dynamic spillovers among the option-implied volatility indices of the S&P 500 and five large individual US stocks (Apple, Amazon, Google, Goldman Sachs and IBM) from June 1, 2010 to May 4, 2018. The results show that connectedness is relatively dominated by the volatility of the S&P 500, although the volatility of some US companies cannot be ignored. The findings also indicate that the pattern of connectedness varies over time. Further analyses highlight the role of short interest rates, P/E ratio, trading volume and market capitalization in driving the degree of integration among the volatility indices.

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  • Bouri, Elie & Lucey, Brian & Roubaud, David, 2020. "Dynamics and determinants of spillovers across the option-implied volatilities of US equities," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 257-264.
    • Handle: RePEc:eee:quaeco:v:75:y:2020:i:c:p:257-264
    DOI: 10.1016/j.qref.2019.03.008
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    References listed on IDEAS

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    14. Bouri, Elie & Roubaud, David & Jammazi, Rania & Assaf, Ata, 2017. "Uncovering frequency domain causality between gold and the stock markets of China and India: Evidence from implied volatility indices," Finance Research Letters, Elsevier, vol. 23(C), pages 23-30.
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    Cited by:

    1. Bartosz Łamasz & Natalia Iwaszczuk, 2020. "The Impact of Implied Volatility Fluctuations on Vertical Spread Option Strategies: The Case of WTI Crude Oil Market," Energies, MDPI, vol. 13(20), pages 1-23, October.
    2. Wang, Zhenkun & Bouri, Elie & Ferreira, Paulo & Shahzad, Syed Jawad Hussain & Ferrer, Román, 2022. "A grey-based correlation with multi-scale analysis: S&P 500 VIX and individual VIXs of large US company stocks," Finance Research Letters, Elsevier, vol. 48(C).
    3. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2020. "Revising the Impact of Financial and Non-Financial Global Stock Market Volatility Shocks," MPRA Paper 103019, University Library of Munich, Germany.
    4. Muhammad Abubakr Naeem & Mudassar Hasan & Abraham Agyemang & Md Iftekhar Hasan Chowdhury & Faruk Balli, 2023. "Time‐frequency dynamics between fear connectedness of stocks and alternative assets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2188-2201, April.
    5. Tissaoui, Kais & Zaghdoudi, Taha, 2021. "Dynamic connectedness between the U.S. financial market and Euro-Asian financial markets: Testing transmission of uncertainty through spatial regressions models," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 481-492.
    6. Bouri, Elie & Lucey, Brian & Saeed, Tareq & Vo, Xuan Vinh, 2020. "Extreme spillovers across Asian-Pacific currencies: A quantile-based analysis," International Review of Financial Analysis, Elsevier, vol. 72(C).
    7. Bouri, Elie & Lucey, Brian & Saeed, Tareq & Vo, Xuan Vinh, 2021. "The realized volatility of commodity futures: Interconnectedness and determinants#," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 139-151.
    8. Yarovaya, Larisa & Elsayed, Ahmed H. & Hammoudeh, Shawkat, 2021. "Determinants of Spillovers between Islamic and Conventional Financial Markets: Exploring the Safe Haven Assets during the COVID-19 Pandemic," Finance Research Letters, Elsevier, vol. 43(C).

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    More about this item

    Keywords

    US VIX; Option-implied volatility; Large US equities; Directional connectedness; Determinants of spillovers;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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