The Impact of the U.S. Macroeconomic Variables on the CBOE VIX Index

Akhilesh Prasad, Priti Bakhshi and Arumugam Seetharaman
Additional contact information
Akhilesh Prasad: SP Jain School of Global Management, Mumbai 400070, India
Priti Bakhshi: SP Jain School of Global Management, Mumbai 400070, India
Arumugam Seetharaman: SP Jain School of Global Management, Hyderabad Road, Singapore 119579, Singapore

JRFM, 2022, vol. 15, issue 3, 1-25

Abstract: The purpose of this study is to find the influence of various macroeconomic factors on the volatility index, as macroeconomic factors affect stock market volatility, resulting in an impact on the VIX Index, representing the risk in the stock market. To estimate the significance and importance of the U.S. macroeconomic variables on stock market volatility and risk, classification problems from machine learning are constructed to predict the daily and weekly trends of the VIX Index. Data from May 2007 to December 2021 is considered for analysis. The selected models are trained with twenty-four daily features and twenty-four plus nine weekly features. The outcomes suggest that the decisions made by the Light GBM and XG Boost on ranking features can be significantly accepted over logistic regression. It is found from the results that economic policy uncertainty indices, gold price, the USD Index, and crude oil are signified as strong predictors. The Financial Stress Index, initial claims, M2, TED spread, Fed rate, and credit spread are also strong predictors, while various yields on fixed income securities make a little less impact on the VIX Index. The TED spread, Financial Stress Index, and Equity Market Volatility (Infectious Disease Tracker) are positively associated with the VIX.

Keywords: machine learning; feature importance; volatility; Financial Stress Index; money supply; equity market; risk (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.mdpi.com/1911-8074/15/3/126/pdf (application/pdf)
https://www.mdpi.com/1911-8074/15/3/126/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:15:y:2022:i:3:p:126-:d:765501

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().