International Journal of Social Science & Economic Research
Submit Paper

Title:
The Relationship Between the Volatility of the S&P 500 and CBOE Volatility Index (VIX)

Authors:
Jainam Shah

|| ||

Jainam Shah
Evergreen Valley High School, San Jose, California

MLA 8
Shah, Jainam. "The Relationship Between the Volatility of the S&P 500 and CBOE Volatility Index (VIX)." Int. j. of Social Science and Economic Research, vol. 9, no. 9, Sept. 2024, pp. 3840-3851, doi.org/10.46609/IJSSER.2024.v09i09.039. Accessed Sept. 2024.
APA 6
Shah, J. (2024, September). The Relationship Between the Volatility of the S&P 500 and CBOE Volatility Index (VIX). Int. j. of Social Science and Economic Research, 9(9), 3840-3851. Retrieved from https://doi.org/10.46609/IJSSER.2024.v09i09.039
Chicago
Shah, Jainam. "The Relationship Between the Volatility of the S&P 500 and CBOE Volatility Index (VIX)." Int. j. of Social Science and Economic Research 9, no. 9 (September 2024), 3840-3851. Accessed September, 2024. https://doi.org/10.46609/IJSSER.2024.v09i09.039.

References

[1] . Ahoniemi, K. (2008). Modeling and forecasting the VIX index. Available at SSRN 1033812.
[2] . Allen, D. E., McAleer, M., Powell, R., & Singh, A. K. (2013). A non-parametric and entropy based analysis of the relationship between the VIX and S&P 500. Journal of Risk and Financial Management, 6(1), 6-30.
[3] . Bellini, F., Mercuri, L., & Rroji, E. (2020). On the dependence structure between S&P500, VIX and implicit Interexpectile Differences. Quantitative Finance, 20(11), 1839-1848.
[4] . Bhowmik, R., & Wang, S. (2018). An investigation of return and volatility linkages among stock markets: A study of emerging Asian and selected developed countries. Journal of International Trade & Commerce, 14(4), 1-29.
[5] . Degiannakis, S. A. (2008). Forecasting vix. Journal of Money, Investment and Banking, (4).
[6] . Grosvenor, T., & Greenidge, K. (2012). Stock market volatility spillover from developed markets to regional markets. Journal of Business, Finance and Economics in Emerging Economies, 7(2), 43-61.
[7] . Ishida, I., McAleer, M., & Oya, K. (2011). Estimating the leverage parameter of continuous?time stochastic volatility models using high frequency S&P 500 and VIX. Managerial Finance, 37(11), 1048-1067.
[8] . Jubinski, D., & Lipton, A. F. (2013). VIX, gold, silver, and oil: how do commodities react to financial market volatility?. Journal of Accounting and Finance, 13(1), 70-88.
[9] . Kanas, A. (2013). The risk-return relation and VIX: evidence from the S&P 500. Empirical Economics, 44, 1291-1314.
[10] . Lin, C. T., & Lee, Y. H. (2010). The jump-diffusion process for the VIX and the S&P 500 index. African Journal of Business Management, 4(9), 1761
[11] . Markowski, ?., & Keller, J. (2020). Fear anatomy–an attempt to assess the impact of selected macroeconomic variables on the variability of the VIX S&P 500 index. Annales Universitatis Mariae Curie-Sk?odowska, Sectio H–Oeconomia, 54(2), 41-51.
[12] . Nikmanesh, L., & Nor, A. H. S. M. (2016). Macroeconomic determinants of stock market volatility: An empirical study of Malaysia and Indonesia. Asian Academy of Management Journal, 21(1), 161..
[13] . Oseni, I. O., & Nwosa, P. I. (2011). Stock market volatility and macroeconomic variables volatility in Nigeria: An exponential GARCH approach. Journal of Economics and Sustainable Development, 2(10), 28-42.
[14] . Prasad, A., Bakhshi, P., & Seetharaman, A. (2022). The impact of the US macroeconomic variables on the CBOE VIX Index. Journal of Risk and Financial Management, 15(3), 126.
[15] . Roszyk, N., & ?lepaczuk, R. (2024). The Hybrid Forecast of S&P 500 Volatility ensembled from VIX, GARCH and LSTM models. arXiv preprint arXiv:2407.16780.
[16] . Shaikh, I. (2020). Does policy uncertainty affect equity, commodity, interest rates, and currency markets? Evidence from CBOE’s volatility index. Journal of Business Economics and Management, 21(5), 1350-1374.
[17] . Smith, K., & Sofianos, G. (1997). The impact of an NYSE listing on the global trading of non-US stocks (Vol. 97). New York Stock Exchange.
[18] . Vodenska, I., & Chambers, W. J. (2013, August). Understanding the relationship between VIX and the S&P 500 index volatility. In 26th Australasian Finance and Banking Conference.
[19] . Vuong, G. T. H., Nguyen, M. H., & Keung Wong, W. (2022). CBOE volatility index (VIX) and corporate market leverage. Cogent Economics & Finance, 10(1), 2111798.
[20] . Yang, M. J., & Liu, M. Y. (2012). The forecasting power of the volatility index in emerging markets: Evidence from the Taiwan stock market. International Journal of Economics and Finance, 4(2), 217-231.

ABSTRACT:
This study investigates the bidirectional Granger causation between the CBOE Volatility Index (VIX) and the volatility of the S&P 500 Index utilizing data obtained from Yahoo Finance. The GARCH (1,1) model is employed for the estimation of conditional volatility. This study employs Granger Causality Tests to determine whether the volatility of the S&P 500 can be forecasted by the VIX Index and vice versa. The results show significant bidirectional Granger causality, indicating that the VIX Index and the S&P 500's historical volatility may be accurately predicted from each other. This study contributes to a better understanding of the dynamic relationship between the volatility of the S&P 500 and the VIX Index.

IJSSER is Member of