Do Volatility Indexes and Historical Volatility Influence Stock Prices? The Japanese Case

Yutaka Kurihara and Shinichiro Maeda

Journal of Applied Finance & Banking, 2019, vol. 9, issue 6, 6

Abstract: This paper examines the relationship between Japanese stock prices and two volatility indexes. In Japan, a drastic monetary policy, Abenomics, designed to combat serious and continued deflation has been conducted since 2013. The two time periods, before and after the policy, are analyzed and compared in this study. Empirical results show that there is no difference between the two periods for volatility indexes on Japanese stock prices, however, the impact of historical volatility (HV) changes on stock prices differs largely between before and after Abenomics. As HV decreases, markets move from bearish to bullish and predict stock prices to rise after the introduction of drastic economic policies. Interest rates have a negative impact on stock prices, and currency depreciation promotes stock price rising after conducting Abenomics.JEL classification numbers: E44, E52, E58Keywords: Abenomics, Historical volatility, Index volatility, monetary policy, stock price

Date: 2019
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