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Extreme spillovers of VIX fear index to international equity markets

Author

Listed:
  • Massaporn Cheuathonghua

    (Thammasat University)

  • Chaiyuth Padungsaksawasdi

    (Thammasat University)

  • Pattana Boonchoo

    (Thammasat University)

  • Jittima Tongurai

    (Kobe University)

Abstract

This study analyzes the impact of VIX spillovers on market activities during extreme market conditions in 42 international equity markets from 1998 to 2014. Specifically, tail cross-dependence suggests that a small change in VIX significantly influences global market activities during extreme market conditions. The impact of VIX is asymmetric, which is more pronounced in bearish, highly volatile, and low trading volume markets. Moreover, VIX spillovers exhibit a stronger impact on returns in developed markets and on volatility in emerging markets. In terms of geographical location, the impact of VIX spillovers is more pronounced on returns in Europe and on volatility in Latin America. These findings indicate that international investors can potentially benefit from international portfolio diversification and can serve as useful guidance to policymakers in designing appropriate policies.

Suggested Citation

  • Massaporn Cheuathonghua & Chaiyuth Padungsaksawasdi & Pattana Boonchoo & Jittima Tongurai, 2019. "Extreme spillovers of VIX fear index to international equity markets," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 33(1), pages 1-38, March.
    • Handle: RePEc:kap:fmktpm:v:33:y:2019:i:1:d:10.1007_s11408-018-0323-6
    DOI: 10.1007/s11408-018-0323-6
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    Cited by:

    1. Khyati Kathuria & Nand Kumar, 2022. "Pandemic‐induced fear and government policy response as a measure of uncertainty in the foreign exchange market: Evidence from (a)symmetric wild bootstrap likelihood ratio test," Pacific Economic Review, Wiley Blackwell, vol. 27(4), pages 361-379, October.
    2. Bahram Adrangi & Arjun Chatrath, 2022. "Dynamic Responses of Major Pacific Rim Emerging Equity Markets to the US Crude Oil Fear Index (OVX)," Bulletin of Applied Economics, Risk Market Journals, vol. 9(1), pages 51-84.
    3. Shah Saeed Hassan Chowdhury, 2023. "Spillover of Sentiments Between the GCC Stock Markets," Global Business Review, International Management Institute, vol. 24(6), pages 1434-1453, December.
    4. İskenderoglu Ömer & Akdag Saffet, 2020. "Comparison of the Effect of Vix Fear Index on Stock Exchange Indices of Developed and Developing Countries: the G20 Case," South East European Journal of Economics and Business, Sciendo, vol. 15(1), pages 105-121, June.
    5. Juan Andres Rodriguez-Nieto & Andre V. Mollick, 2021. "The US financial crisis, market volatility, credit risk and stock returns in the Americas," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(2), pages 225-254, June.
    6. Zhu, Bo & Lin, Renda & Deng, Yuanyue & Chen, Pingshe & Chevallier, Julien, 2021. "Intersectoral systemic risk spillovers between energy and agriculture under the financial and COVID-19 crises," Economic Modelling, Elsevier, vol. 105(C).
    7. Szczygielski, Jan Jakub & Charteris, Ailie & Obojska, Lidia, 2023. "Do commodity markets catch a cold from stock markets? Modelling uncertainty spillovers using Google search trends and wavelet coherence," International Review of Financial Analysis, Elsevier, vol. 87(C).
    8. SOSA-CASTRO, Miriam, 2022. "Equity Market Volatility Impact On S&P 500 Sector Indexes, 1989-2021," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 22(1), pages 39-60.
    9. Cheuathonghua, Massaporn & de Boyrie, Maria E. & Pavlova, Ivelina & Wongkantarakorn, Jutamas, 2022. "Extreme risk spillovers from commodity indexes to sovereign CDS spreads of commodity dependent countries: A VAR quantile analysis," International Review of Financial Analysis, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    VIX; Tail distribution; Extreme market conditions; International equity market;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F3 - International Economics - - International Finance

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