Stock returns and implied volatility: A new VAR approach

Bong Soo Lee and Doojin Ryu

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2013, vol. 7, No 2013-3, 20 pages

Abstract: The authors re-examine the return-volatility relationship and its dynamics under a new vector autoregression (VAR) identification framework. By analyzing two model-free impliedvolatility indices - the well-established VIX (in the United States) and the recently published VKOSPI (in Korea) - and their stock market indices, the authors find an asymmetric volatility phenomenon in both the developed and emerging markets. However, the VKOSPI shows impulse response dynamics that are quite different from those of the VIX. This finding can be attributed to the unique characteristics of the KOSPI200 options market, which determine the dynamics of the VKOSPI.

Keywords: asymmetric volatility; vector autoregression; VIX; VKOSPI (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:20133

DOI: 10.5018/economics-ejournal.ja.2013-3

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