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

Libing Fang, Yichuo Qian, Ying Chen and Honghai Yu

Physica A: Statistical Mechanics and its Applications, 2018, vol. 505, issue C, 490-499

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.

Keywords: News-based implied volatility; Uncertainty; Stock market volatility; GARCH–MIDAS (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:505:y:2018:i:c:p:490-499

DOI: 10.1016/j.physa.2018.03.039

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