Business and Economic Horizons

  Previous Article | Back to Volume | Next Article
  Abstract | References | Citation | Download | Preview | Statistics
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
Abstract
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. 

Citation
References
Aboura, S. (2003). International transmission of volatility: A study on the volatility indexes VX1, VDAX and VIX. Available at SSRN: http://ssrn.com/abstract=514282

Ahmad, W., & Kamaiah, B. (2011). Identifying regime shifts in Indian stock market: a Markov switching approach. Munich personal RePEc archive, 1-22.

Äijö, J. (2008). Implied volatility term structure linkages between VDAX, VSMI and VSTOXX volatility indices. Global Finance Journal, 18(3), 290-302

Apte, P. (2001). The Interrelationship between the stock markets and the Foreign Exchange Market. IIM Bangalore Research Paper, (169).

Baba, N., & Sakurai, Y. (2011). Predicting regime switches in the VIX index with macroeconomic variables. Applied Economics Letters, 18(15), 1415-1419.

Badshah, I. U., Frijns, B., & Tourani‐Rad, A. (2013). Contemporaneous spill‐over among equity, gold, and exchange rate Implied Volatility Indices. Journal of Futures Markets, 33(6), 555-572.

Bahloul, S., & Abid, F. (2014). Regime-switching behaviour in the conditional volatility of MENA stock market returns. Journal of Emerging Market Finance, 13(3), 253-278.

Chen, R. (2009). Regime switching in volatilities and correlation between stock and bond markets. Available at http://eprints.lse.ac.uk/29306/

Clements, A. (2007). S&P 500 implied volatility and monetary policy announcements. Finance Research Letters, 4(4), 227-232.

Cohen, G., & Qadan, M. (2010). Is gold still a shelter to fear? American Journal of Social and Management Sciences, 1(1), 39-43.

Di Persio, L., & Vettori, S. (2014). Markov switching model analysis of implied volatility for market indexes with applications to S&P 500 and DAX. Journal of Mathematics, 2014.

Hamilton, J. D. (1990). Analysis of time series subject to changes in regime. Journal of econometrics, 45(1), 39-70.

Hardy, M. R. (2001). A regime-switching model of long-term stock returns. North American Actuarial Journal, 5(2), 41-53.

Korkmaz, T., & Çevik, E. I. (2009). Volatility spillover effect from volatility implied index to emerging markets. Journal of BRSA Banking and Financial Markets, 3(2), 87-106.

Maghrebi, N., Kim, M. S., & Nishina, K. (2007). The KOSPI200 implied volatility index: evidence of regime switches in volatility expectations. Asia-Pacific Journal of Financial Studies, 36(2), 187.

Marabel Romo, J. (2011). Volatility regimes for the VIX index. Revista de Economía Aplicada, XX(2012), 114-134.

Narwal, K. P., Sheera, V. P., & Mittal, R. (2012). Spillovers and Transmission in Emerging and Mature Markets Implied Volatility Indices. International Journal of Financial Management, 2(4), 47-59.

Nikkinen, J., & Sahlström, P. (2004). International transmission of uncertainty implicit in stock index option prices. Global Finance Journal, 15(1), 1-15.

Keywords Markov regime switching, financial integration, implied volatility index, correlation.
DOI http://dx.doi.org/10.15208/beh.2017.45
Pages 666-675
Download Full PDF Download
  Previous Article | Back to Volume | Next Article
Share
Search in articles
Statistics
Journal Published articles
BEH 558
Journal Hits
BEH 1132525
Journal Downloads
BEH 41256
Total users online -