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CBOE volatility index (VIX) and corporate market leverage

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  • Giang Thi Huong Vuong
  • Manh Huu Nguyen
  • Wing Keung Wong

Abstract

Our paper investigates the nexus between the CBOE Volatility Index (VIX) and the market leverage of firms listed on the US stock market. Analyzing the yearly database of non-financial US firms from 2000 to 2019, we find that an increase in the VIX index has a positive impact on the leverage of the corporate market. We also find robust evidence that the US-listed firms tend to use more market leverage in the future year when the VIX index ascends. Furthermore, we find a more prominent positive effect of the change in the VIX index on the long-term market leverage than the short-term market leverage. Different approaches for the panel models firmly support our findings. In addition, our research suggests that the implied volatility index is a good proxy to measure investors’ fear of securities investment and provides a good foundation for making the capital structure decisions for the firms listed on the US stock market.

Suggested Citation

  • Giang Thi Huong Vuong & Manh Huu Nguyen & Wing Keung Wong, 2022. "CBOE volatility index (VIX) and corporate market leverage," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2111798-211, December.
    • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2111798
    DOI: 10.1080/23322039.2022.2111798
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    Cited by:

    1. Vuong, Giang Thi Huong & Nguyen, Phuc Van & Barky, Walid & Nguyen, Manh Huu, 2024. "Stock return volatility and financial distress: Moderating roles of ownership structure, managerial ability, and financial constraints," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 634-652.
    2. Vuong, Giang Thi Huong & Nguyen, Manh Huu & Huynh, Anh Ngoc Quang, 2022. "Volatility spillovers from the Chinese stock market to the U.S. stock market: The role of the COVID-19 pandemic," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).

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