VIX or ınvestors scare?

Hakan Yıldırım ()
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Hakan Yıldırım: Istanbul Gelisim University

Quality & Quantity: International Journal of Methodology, 2022, vol. 56, issue 2, No 19, 769-777

Abstract: Abstract The behavior of the VIX index became significantly volatile during the 2007–2009 Global Financial Crisis (GFC) period, which is an important period when the 2008 financial crisis was triggered. In this context, the reality of the fear index that occurred during this period is a matter of concern as reflected by the financial markets literature. Therefore, the study employed the daily VIX index data for the period of 03.01.2007 to 31.12.2009. Thus, the Sup-Augmented Dickey Fuller (SADF) and Generalized Sup-Augmented Dickey Fuller (GSADF) test were used to examine the presence of bubble in the fear index for the pre-crisis, crisis period and post-crisis. As a result of the SADF test results, the presence of price bubbles is statistically significant at 5% statistical level for the period under consideration, while the findings of the applied GSADF test are significant at 1% statistical level. In addition, the VIX index movements were exposed to bubble formation in two different periods and that the bubbles in those periods were deflated. This confirms that there may be speculative movements in VIX index. Thus, reflecting the significant presence of fear associated with the occurences of the pre-, during, and post-crisis period of the GFC.

Keywords: Price bubble; VIX Index; SADF and GSADF tests; Global Financial Crisis (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11135-021-01153-3

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