Spillovers of volatility index: evidence from U.S., European, and Asian stock markets

Hui-Chu Shu and Jung-Hsien Chang

Applied Economics, 2019, vol. 51, issue 19, 2070-2083

Abstract: We investigated the cross-market relations of volatility indexes with U.S. and non-U.S. stock market returns. We found that the pervasive VIX influence at both U.S. and non-U.S. stock markets. The VSTOXX and VKOSPI capture the major shocks to the global economy and show movements similar to the VIX. The empirical findings indicate that volatility index changes are important in explaining stock returns. We also examined spillover effects across volatility indexes. The VIX is a main transmitter, and the VKOSPI the main receiver, of these spillovers. The results point to a leading role for the VIX in the international market.

Date: 2019
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DOI: 10.1080/00036846.2018.1540846

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