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Relationship of the change in implied volatility with the underlying equity index return in Thailand

Author

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  • Thakolsri, Supachock
  • Sethapramote, Yuthana
  • Jiranyakul, Komain

Abstract

The main purpose of this study is to examine the relationship between the change in implied volatility index and the underlying stock index return. The dataset used in this study is from 11/19/2010 to 12/27/2013. The regression analysis is performed on stationary series. The empirical results reveal that there is evidence of a significantly negative and asymmetric relationship between the return and the change in implied volatility in the Thai stock market. The finding in this study gives implication for risk management.

Suggested Citation

  • Thakolsri, Supachock & Sethapramote, Yuthana & Jiranyakul, Komain, 2015. "Relationship of the change in implied volatility with the underlying equity index return in Thailand," MPRA Paper 67986, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:67986
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    References listed on IDEAS

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    1. Jeff Fleming & Barbara Ostdiek & Robert E. Whaley, 1995. "Predicting stock market volatility: A new measure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 15(3), pages 265-302, May.
    2. George Skiadopoulos, 2004. "The Greek implied volatility index: construction and properties," Applied Financial Economics, Taylor & Francis Journals, vol. 14(16), pages 1187-1196.
    3. Siriopoulos, Costas & Fassas, Athanasios, 2012. "An investor sentiment barometer — Greek Implied Volatility Index (GRIV)," Global Finance Journal, Elsevier, vol. 23(2), pages 77-93.
    4. Supachok Thakolsri & Yuthana Sethapramote & Komain Jiranyakul, 2016. "Implied Volatility Transmissions Between Thai and Selected Advanced Stock Markets," SAGE Open, , vol. 6(3), pages 21582440166, July.
    5. Christie, Andrew A., 1982. "The stochastic behavior of common stock variances : Value, leverage and interest rate effects," Journal of Financial Economics, Elsevier, vol. 10(4), pages 407-432, December.
    6. Bart Frijns & Christian Tallau & Alireza Tourani‐Rad, 2010. "The information content of implied volatility: Evidence from Australia," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 30(2), pages 134-155, February.
    7. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
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    More about this item

    Keywords

    Equity index return; implied volatility; asymmetric effect;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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