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How does stock market volatility react to NVIX? Evidence from developed countries

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  • Fang, Libing
  • Qian, Yichuo
  • Chen, Ying
  • Yu, Honghai

Abstract

This paper investigates the role of news implied volatility (NVIX), a measure of uncertainty, in long-term stock market volatility in developed markets. The results showed that NVIX has a positive and significant impact on stock market variances in the full sample period using the GARCH–MIDAS model. Furthermore, out-of-sample forecasting results showed that including NVIX generally improves forecasting performance; that is, the GARCH–MIDAS model, with the long-term component driven by realized volatility (RV) and NVIX, outperforms those with only RV in terms of forecasting performance.

Suggested Citation

  • Fang, Libing & Qian, Yichuo & Chen, Ying & Yu, Honghai, 2018. "How does stock market volatility react to NVIX? Evidence from developed countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 505(C), pages 490-499.
    • Handle: RePEc:eee:phsmap:v:505:y:2018:i:c:p:490-499
    DOI: 10.1016/j.physa.2018.03.039
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    7. 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.

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