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Is VIX still the investor fear gauge? Evidence for the US and BRIC markets

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  • Marco Neffelli
  • Marina Resta

Abstract

We investigate the relationships of the VIX with US and BRIC markets. In detail, we pick up the analysis from the point left off by (Sarwar, 2012), and we focus on the period: Jan 2007 - Feb 2018, thus capturing the relations before, during and after the 2008 financial crisis. Results pinpoint frequent structural breaks in the VIX and suggest an enhancement around 2008 of the fear transmission in response to negative market moves; largely depending on overlaps in trading hours, this has become even stronger post-crisis for the US, while for BRIC countries has gone back towards pre-crisis levels.

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  • Marco Neffelli & Marina Resta, 2018. "Is VIX still the investor fear gauge? Evidence for the US and BRIC markets," Papers 1806.07556, arXiv.org, revised Jul 2018.
    • Handle: RePEc:arx:papers:1806.07556
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    References listed on IDEAS

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    1. Ghulam Sarwar, 2012. "Intertemporal relations between the market volatility index and stock index returns," Applied Financial Economics, Taylor & Francis Journals, vol. 22(11), pages 899-909, June.
    2. Weiyu Guo & Mark E. Wohar, 2006. "Identifying Regime Changes In Market Volatility," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(1), pages 79-93, March.
    3. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
    4. Ghulam Sarwar & Walayet Khan, 2017. "The Effect of US Stock Market Uncertainty on Emerging Market Returns," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(8), pages 1796-1811, August.
    5. Sarwar, Ghulam, 2012. "Is VIX an investor fear gauge in BRIC equity markets?," Journal of Multinational Financial Management, Elsevier, vol. 22(3), pages 55-65.
    6. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    7. Ihsan U. Badshah, 2018. "Volatility Spillover from the Fear Index to Developed and Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(1), pages 27-40, January.
    8. Sarwar, Ghulam, 2014. "U.S. stock market uncertainty and cross-market European stock returns," Journal of Multinational Financial Management, Elsevier, vol. 28(C), pages 1-14.
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    Cited by:

    1. Bahram Adrangi & Arjun Chatrath & Joseph Macri & Kambiz Raffiee, 2019. "Dynamic Responses of Major Equity Markets to the US Fear Index," JRFM, MDPI, vol. 12(4), pages 1-23, September.
    2. Bahram Adrangi & Arjun Chatrath & Madhuparna Kolay & Kambiz Raffiee, 2021. "Dynamic Responses of Standard and Poor’s Regional Bank Index to the U.S. Fear Index, VIX," JRFM, MDPI, vol. 14(3), pages 1-18, March.

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