Dynamic Responses of Standard and Poor’s Regional Bank Index to the U.S. Fear Index, VIX

Bahram Adrangi, Arjun Chatrath, Madhuparna Kolay and Kambiz Raffiee
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Bahram Adrangi: Pamplin School of Business Administration, University of Portland, 5000 N. Willamette Blvd, Portland, OR 97203, USA
Arjun Chatrath: Pamplin School of Business Administration, University of Portland, 5000 N. Willamette Blvd, Portland, OR 97203, USA
Madhuparna Kolay: Pamplin School of Business Administration, University of Portland, 5000 N. Willamette Blvd, Portland, OR 97203, USA
Kambiz Raffiee: Department of Economics, College of Business, University of Nevada, Reno, NV 89557, USA

JRFM, 2021, vol. 14, issue 3, 1-18

Abstract: This study examines the reaction of the Standard and Poor’s Regional Bank Index (SPRB) to the U.S. equity market fear index (i.e., the Chicago Board of Trade Volatility Index [VIX]). The VIX is designed to perform as a leading indicator of the volatility in equity markets. However, practitioners observe many periods of divergence between the VIX and S&P 500. Our paper examines the daily data for the period of 2009 through 2019. We show that once the effects of consumer confidence and capacity utilization are accounted for, there is a negative association between the VIX and regional bank performance.

Keywords: volatility; Standard and Poor’s Regional Bank Index; Kalman filter; spectral analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
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