Indian Implied Volatility Index: A Macroeconomic Study

Jyothi Chittineni

Applied Economics and Finance, 2018, vol. 5, issue 5, 75-82

Abstract: The study investigates the dynamic behavior of Indian implied volatility index and its time dependent conditional correlations with selected macroeconomic variables. The volatility of macroeconomic variables is likely to put burden on inflation and also influence the economic decisions as investment vehicles. Thus, the volatility of these variables has become central issue for fund managers and investors. The study uses three macroeconomic variables, oil price, gold price and federal fund rate over the period 2nd March 2009 to 30th June 2018. The Dynamic Regime-Switching model reveals that the Indian Implied volatility index exhibits two regimes high volatility and low volatility states. There exists a high degree of synchronicity between Indian VIX and oil price movement. Oil price has significant impact on India VIX during high volatile state. The result alarms the attention of monetary policy makers. The policy of oil price deregulation has to be carefully monitored.

Keywords: implied volatility index; dynamic regime-switching model; conditional correlations; macroeconomic variables. (search for similar items in EconPapers)
Date: 2018
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