Regime switching behavior of Indian VIX and its time dependent correlation with select developed economies

Jyothi Chittineni,

Business and Economic Horizons (BEH), 2017, vol. 13, issue 5, 666-675

Abstract: This paper investigates the international financial market integration as a trigger for regime switching behavior of Indian implied volatility index and its regime-dependent conditional correlations with the selected developed markets. The 2-state dynamic regression model reveals two different regimes using state-dependent variables during the time period 2009 to 2016. The results found that Hong Kong and US markets have a significant effect on the Indian market during highly volatile state, and there is a clear decoupling effect among these markets when the Indian market is stable. The predicted turning point probabilities indicate that the bull market state is persistent.

Keywords: Markov regime switching; financial integration; implied volatility index; correlation. (search for similar items in EconPapers)
JEL-codes: M1 M10 M12 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pdc:jrnbeh:v:13:y:2017:i:5:p:666-675

DOI: 10.15208/beh.2017.45

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