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The relationship between news-based implied volatility and volatility of US stock market: What can we learn from multiscale perspective?

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  • Mo, Bin
  • Mu, Jinqi
  • Zhang, Bilin

Abstract

This paper aims to employ the wavelet-based copula approach to empirically study the relationship between news-based implied volatility and the volatility of the US stock market using monthly data for the period January 1980 to March 2016. We find that the dependence structure is determined to be time-horizon dependent, in the short term, the correlation is very weak but quite strong in the long term. Furthermore, the asymmetric tail dependence structure can better explain the time-varying relationship in the long run shown by the time-varying SJC copula.

Suggested Citation

  • Mo, Bin & Mu, Jinqi & Zhang, Bilin, 2019. "The relationship between news-based implied volatility and volatility of US stock market: What can we learn from multiscale perspective?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 526(C).
    • Handle: RePEc:eee:phsmap:v:526:y:2019:i:c:s0378437119306120
    DOI: 10.1016/j.physa.2019.04.239
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    Citations

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    Cited by:

    1. Sahibzada, Irfan Ullah, 2023. "To what extent do sovereign rating actions affect global equity market sectors?," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 240-261.
    2. Zhu, Sha & Liu, Qiuhong & Wang, Yan & Wei, Yu & Wei, Guiwu, 2019. "Which fear index matters for predicting US stock market volatilities: Text-counts or option based measurement?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 536(C).
    3. A. Hachicha & F. Hachicha, 2021. "Analysis of the bitcoin stock market indexes using comparative study of two models SV with MCMC algorithm," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 647-673, February.
    4. Adekoya, Oluwasegun B. & Oliyide, Johnson A. & Kenku, Oluwademilade T. & Al-Faryan, Mamdouh Abdulaziz Saleh, 2022. "Comparative response of global energy firm stocks to uncertainties from the crude oil market, stock market, and economic policy," Resources Policy, Elsevier, vol. 79(C).
    5. Dutta, Anupam & Bouri, Elie & Saeed, Tareq, 2021. "News-based equity market uncertainty and crude oil volatility," Energy, Elsevier, vol. 222(C).
    6. Wang, Gaoshan & Yu, Guangjin & Shen, Xiaohong, 2021. "The effect of online environmental news on green industry stocks: The mediating role of investor sentiment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).

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