An Investigation of the Predictive Speed of the UK VIX for the Downside Risk in European Equity Markets
International Business Research, 2018, vol. 11, issue 12, 18-25
Using the time-series data of UK volatility index (VIX) and other four European equity indices of France, Italy, Spain, and Portugal, and applying quantile regressions, this study investigates the predictive power and predictive speed of the UK VIX for the future sharp price drops in other four European equity markets. As a result, our empirical examinations derive the following findings. (1) First, we clarify that the increases of the UK VIX have statistically significant predictive power for the downside risk in other four European equity markets. (2) Second, our empirical results reveal that the two to four days before, the changes in the UK VIX can forecast the downside risk in other four European equity markets.
Keywords: European equity markets; downside risk; quantile regression; VIX (search for similar items in EconPapers)
JEL-codes: C33 F31 F41 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ibrjnl:v:11:y:2018:i:12:p:18-25
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