Predicting regime switches in the VIX index with macroeconomic variables

N. Baba and Y. Sakurai

Applied Economics Letters, 2011, vol. 18, issue 15, 1415-1419

Abstract: In this article, we investigate the role of US macroeconomic variables as leading indicators of regime shifts in the VIX index using a regime-switching approach. We find that there are three distinct regimes in the VIX index during the 1990 to 2010 period: tranquil regime with low volatility, turmoil regime with high volatility and crisis regime with extremely high volatility. We also show that the regime shift from the tranquil to the turmoil regime is significantly predicted by lower term spreads.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:18:y:2011:i:15:p:1415-1419

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DOI: 10.1080/13504851.2010.539532

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