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Does NVIX matter for market volatility? Evidence from Asia-Pacific markets

Author

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  • Su, Zhi
  • Fang, Tong
  • Yin, Libo

Abstract

Forecasting financial market volatility is an important issue in the area of econophysics, and revealing the determinants of the market volatility has drawn much attentions of the academics. In order to better predict market volatilities, we use news-based implied volatility (NVIX) to measure uncertainty, and examine the predictive power of NVIX on the stock market volatility in both long and short-term among Asia-Pacific markets via GARCH-MIDAS model. We find that NVIX does not well explain long-term volatility variants in the full sample period, and it is positively associated with market volatility through a subsample analysis starting from the Financial Crisis. We also find that NVIX is more efficient in determining short-term volatility than the long-term volatility, indicating that the impact of NVIX is short-lived and information that investors concern could be quickly reflected in the stock market volatilities.

Suggested Citation

  • Su, Zhi & Fang, Tong & Yin, Libo, 2018. "Does NVIX matter for market volatility? Evidence from Asia-Pacific markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 506-516.
    • Handle: RePEc:eee:phsmap:v:492:y:2018:i:c:p:506-516
    DOI: 10.1016/j.physa.2017.10.025
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    Citations

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    Cited by:

    1. Fang, Tong & Su, Zhi & Yin, Libo, 2020. "Economic fundamentals or investor perceptions? The role of uncertainty in predicting long-term cryptocurrency volatility," International Review of Financial Analysis, Elsevier, vol. 71(C).
    2. Su, Zhi & Fang, Tong & Yin, Libo, 2019. "Understanding stock market volatility: What is the role of U.S. uncertainty?," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 582-590.
    3. Xia, Yufei & Sang, Chong & He, Lingyun & Wang, Ziyao, 2023. "The role of uncertainty index in forecasting volatility of Bitcoin: Fresh evidence from GARCH-MIDAS approach," Finance Research Letters, Elsevier, vol. 52(C).

    More about this item

    Keywords

    News-based implied volatility; Uncertainty; Stock market volatility; GARCH-MIDAS; Volatility predictability;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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