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Volume 13
Issue 5
Online publication date 2017-11-12
Title Regime switching behavior of Indian VIX and its time dependent correlation with select developed economies
Author Jyothi Chittineni
This paper investigates the international financial market integration as a trigger for regime switching behavior of Indian implied volatility index and its regime-dependent conditional correlations with the selected developed markets. The 2-state dynamic regression model reveals two different regimes using state-dependent variables during the time period 2009 to 2016. The results found that Hong Kong and US markets have a significant effect on the Indian market during highly volatile state, and there is a clear decoupling effect among these markets when the Indian market is stable. The predicted turning point probabilities indicate that the bull market state is persistent. 

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Keywords Markov regime switching, financial integration, implied volatility index, correlation.
Pages 666-675
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