scholarly journals The Behavior of Option’s Implied Volatility Index: a Case of India VIX

2015 ◽  
Vol 16 (2) ◽  
pp. 149-158 ◽  
Author(s):  
Imlak Shaikh ◽  
Puja Padhi
Keyword(s):  
Implied Volatility ◽  
Negative Impact ◽  
Practical Implication ◽  
Stock Market Volatility ◽  
Put Options ◽  
Monday Effect ◽  
Volatility Index ◽  
Significant Negative Impact ◽  
Day Of The Week ◽  
India Vix

The aim of this paper is to investigate the behavior of implied volatility in the form of day-of-the-week, year-of-the-month and surround the expiration of options. The persistence of volatility is modeled in ARCH/GARCH type framework. The empirical results have shown significant effects of the day-of-the-week, month-of-the-year and day of options expiration. The positive significant Monday effect explains that India VIX rises significantly on the initial days of the market opening, and the significant negative Wednesday effect shows that expected stock market volatility fall through Wednesday-Friday. Moreover, the study reveals the fact on options expiration, the evidence shows that India VIX fall significantly on the day of expiration of European call and put options. The March and December months have reported significant negative impact on the volatility index. Certainly, this kind of results holds practical implication for volatility traders, and helps to the market participant in hedging and pricing of options.

scholarly journals The Forecasting Power of the Volatility Index: Evidence from the Indian Stock Market

2016 ◽  
Vol 4 (1) ◽  
Author(s):  
Surya Bahadur G. C. ◽  
Ranjana Kothari
Keyword(s):  
Stock Market ◽  
Implied Volatility ◽  
Market Volatility ◽  
Series Data ◽  
Future Price ◽  
Stock Market Volatility ◽  
Short Term ◽  
Volatility Index ◽  
India Vix ◽  
Indian Stock Market

<div><p><em>Stock market volatility is a measure of risk in investment and it plays a key role in securities pricing and risk management. </em><em>The paper empirically analyzes the relationship between India VIX and volatility in Indian stock market. </em><em>India VIX is a measure of implied volatility which reflects markets’ expectation of future short-term stock market volatility.</em><em> It is a volatility index based on the index option prices of Nifty. </em><em>The study is based on time series data comprising of daily closing values of CNX Nifty 50 index comprising of 1656 observations from March 2009 to December 2015. </em><em>The results of the study </em><em>reveal that India VIX has predictive power for future short-term stock market volatility. It has higher forecasting ability for upward stock market movements as compared to downward movements. Therefore, it is more a bullish indicator. Moreover, the accuracy of forecasts provided by India VIX is higher for low magnitude future price changes relative to higher stock price movements. The current value of India VIX is found to be affected by past period volatility up to one month and it has forecasting ability for next one-month’s volatility which means the volatility in the Indian stock markets can be forecasted for up to 60 days period. </em></p></div>

Examining Contemporaneous Relationship between Return of Nifty Index and India VIX

2015 ◽  
Vol 5 (2) ◽  
Author(s):  
Prasenjit Chakrabarti
Keyword(s):  
Implied Volatility ◽  
Stock Index ◽  
Quadratic Effect ◽  
Asymmetric Building ◽  
Volatility Index ◽  
India Vix ◽  
The Relationship

The study examines the contemporaneous relationship between Nifty returns and India VIX returns. Literature documents that the relationship between them is negative and asymmetric. Building on this, the study considers the linear and quadratic effect of stock index return (CNX Nifty) and examines the changes in implied volatility index (India VIX). The study finds both linear and quadratic CNX Nifty index returns are significant for changes in the level of India VIX. Findings suggest that India VIX provides insurance both for downside market movement and size of the downside movement.

scholarly journals The U.S. Presidential Election 2012/2016 and Investors’ Sentiment: The Case of CBOE Market Volatility Index

SAGE Open ◽  
2019 ◽  
Vol 9 (3) ◽  
pp. 215824401986417
Author(s):  
Imlak Shaikh
Keyword(s):  
Stock Market ◽  
Presidential Election ◽  
Presidential Elections ◽  
Implied Volatility ◽  
Substantial Effect ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Volatility Index ◽  
Stock Market Performance ◽  
The U.S

Given that political events have substantial effect on new economic policies and economic performance of the country, this article aims to examine the behavior of the investors’ sentiment in terms of implied volatility index trailed by the U.S. presidential elections. The study empirically tests whether the presidential elections in 2012/2016 do contain the important market inclusive information to explain the expected stock market volatility. The findings indicate that investors’ concern was distracted around the presidential elections window, albeit the market performed identically in both the presidential election years. The significant fall in the implied volatility level (post-election period) is the calm before the storm, just wait and watch. The positive estimate uncovers the fact that investor worries were higher before the election day. In particular, the significant estimate of the presidential election debate shows that investors do regard the minutes of the presidential election debates in their portfolio selection. At the two elections era, on the candidacy of both the parties, the empirical result speaks marginally contrasting outcomes and falsifies the presidential election cycle hypothesis of past 29 U.S. election years. Empirical estimates conclude that the presidential elections in 2012/2016 have a strong, significant relationship with investor’s sentiment and stock market performance.

Foreign Direct Investment in Sub-Saharan Africa: Is Tax Obligation Still an Issue?

2020 ◽  
pp. 097215091989024
Author(s):  
Francis K. Andoh ◽  
William G. Cantah
Keyword(s):  
Foreign Direct Investment ◽  
Natural Resources ◽  
Direct Investment ◽  
Negative Impact ◽  
Practical Implication ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Significant Negative Impact ◽  
Negative Effect ◽  
Sub Saharan

This study examines the extent to which three aspects of tax obligations affect foreign direct investment (FDI) stock in sub-Saharan Africa (SSA). Using a panel of 36 countries in SSA from 2005 to 2016 and employing the dynamic system generalized method of moments (GMM) regression approach, the findings show a significant negative impact of all measures of tax obligations. However, the effect of the number of taxes and the time it takes to honour tax obligations are found to have greater negative effect. The findings show that although foreign investors are attracted by natural resources, they still care about the complicated and bureaucratic tax system. This challenges the conventional notion that FDI will always be attracted to and be maintained in Africa as long as there are natural resources. The practical implication is that reducing the number of taxes as well as the time it takes to honour tax obligations should be among the key measures for SSA economies to maintain high stock of FDI. As a contribution, this study provides an important information for the debate on fiscal environment and FDI in Africa.

On the relationship between implied volatility index and equity index returns

2016 ◽  
Vol 43 (1) ◽  
pp. 27-47 ◽  
Author(s):  
Imlak Shaikh ◽  
Puja Padhi
Keyword(s):  
Implied Volatility ◽  
Stock Index ◽  
Financial Assets ◽  
Content Type ◽  
Market Opening ◽  
Volatility Index ◽  
India Vix ◽  
High Level ◽  
Equity Index ◽  
Japan And China

Purpose – The purpose of this paper is to analyze the asymmetric contemporaneous relationship between implied volatility index (India VIX) and Equity Index (S & P CNX Nifty Index). In addition, the study also analyzes the seasonality of implied volatility index in the form of day-of-the-week effects and option expiration cycle. Design/methodology/approach – This study employs simple OLS estimation to analyze the contemporaneous relationship among the volatility index and stock index. In order to obtain robust results, the analysis has been presented for the calendar years and sub-periods. Moreover, the international evidenced presented for other Asian markets (Japan and China). Findings – The empirical evidences reveal a strong persistence of asymmetry among the India VIX and Nifty stock index, at the same time the magnitude of asymmetry is not identical. The results show that the changes in India VIX occur bigger for the negative return shocks than the positive returns shocks. The similar kinds of results are recorded for the Japan and China volatility index. Particularly, the analysis also supports that India VIX holds seasonality, on the market opening VIX observed to be at its high level, and on the subsequent days it remains low. The results on the options expiration unfold the facts that India VIX remains more normal on the day of expiration. Practical implications – The asymmetric relation and seasonal patterns are quite useful to the volatility traders to price the financial assets when market trades in the high- and low-volatility periods. Originality/value – There is a lack of studies of this kind in the context of emerging markets like India; hence, this is an attempt in this direction. The study provides an insight to the NSE to launch some derivative products (i.e. F & Os) on India VIX that can generate more liquidity in the market for the volatility traders.

scholarly journals DOES POLICY UNCERTAINTY AFFECT EQUITY, COMMODITY, INTEREST RATES, AND CURRENCY MARKETS? EVIDENCE FROM CBOE’S VOLATILITY INDEX

2020 ◽  
Vol 21 (5) ◽  
pp. 1350-1374
Author(s):  
Imlak Shaikh
Keyword(s):  
Economic Policy ◽  
Interest Rates ◽  
Implied Volatility ◽  
Empirical Work ◽  
Investor Sentiment ◽  
Policy Uncertainty ◽  
Stock Market Volatility ◽  
Currency Markets ◽  
Volatility Index ◽  
The Us

Economic policy drives investment, production, employment, and other macroeconomic indicators of the economy. The study examines the equity, commodity, interest rates, and currency markets, taking into consideration the US economic policy uncertainty (EPU) index. The present work determines the association among policy uncertainty and volatility index, expressed in terms of generalized autoregressive conditional heteroscedasticity and period of empirical work spanning from 2000 to 2018. The results suggest that equity markets’ volatility tends to be very high based on a high degree of policy uncertainty. The findings on the commodity market indicate that crude oil and gold prices remain more volatile during the presidential election and financial crisis. One of the essential results shows that the 2000s boom, early credit crunch, Lehman’s collapse and recession, and fiscal policy battles have significantly affected the equity, currency, and commodity markets. The interest rates and currency markets have responded considerably to Feds’ and EPU index. The empirical outcome provides evidence that implied volatility index is a forward looking expectation of future stock market volatility, and it uncovers that policy uncertainty affects investor sentiment. The present work holds some practical implications for the government to formulate policies to regulate the US market.

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