India VIX Research Articles

Macroeconomic Announcements and the Implied Volatility Index: Evidence from India VIX

This study examines the impact of scheduled macroeconomic announcements on the option’s implied volatility index in the emerging market. The macroeconomic indicators considered are RBI monetary policy statements, the consumer price index, wholesale price index, index of industrial production, the employment rate and gross domestic product (GDP growth rate). The study reveals that during non-announcement periods the implied volatility index (India VIX) increases significantly. Once results are announced, uncertainty is resolved and the India VIX returns to normal levels. It confirms that the India VIX declines significantly following scheduled GDP news, but rises significantly on the announcement of monthly inflation rates (WPI). Indeed, the joint effect of the announcements relating to monetary policy, the industrial output, employment rate and GDP is found to be statistically significant (and negative). JEL Classification: E52, E58, G12, G14

The information content of implied volatility index (India VIX)

This paper examines the predictive ability of India VIX as the best forecast of realized return volatility. This study takes into account the implied volatility index (India VIX), also known as the investors fear gauge index. We have employed OLS, 2SLS procedure and quantile regression to study the predictive power of implied volatility index. Empirical results show that India VIX is the best estimate of future realized return volatility. The Hausman specification test analyzes that implied volatility is measured with the errors; consequently, instrumental variable technique is used. The 2SLS estimation procedure shows that 2SLS estimates are more consistent than the simple OLS. Finally, the 2SLS procedure explains that historical volatility does not contain valuable information what already contained in the implied volatility. The implied volatility best subsumes the market-wide information to explain the future volatility. This study explains that Asian implied volatility indices also subsumes the information regarding the future volatility like the US and European volatility indices.

The Information Content of Macroeconomic News

This paper investigates how India VIX responds to the scheduled macroeconomic announcements. The study takes into account various macroeconomic indicators like national product, employment rate, industrial production, inflation rates, fed's monetary policy statement, corporate confidence, balance of payment and international reserve. Results uncovers that VIX is significantly attributed toward the macroeconomic indicators. We find that India VIX is more responsive to the GDP and employment rate. We also find that VIX rises significantly prior to the scheduled announcement and remains more normal on the new releases. The fed's monetary policy also plays great role in determining the portfolio selection. The empirical finding reveals that market participants consider India VIX as the market expectation about the future volatility. In addition, the joint effect of more than one announcement on VIX found to be significant.

India VIX: Examining the Negative and Asymmetric Volatility Index – Market Return Relationship

This paper examines the behavior of India Volatility Index (India VIX). We study two aspects: First, the negative correlation between changes in India VIX and market returns. Second, the asymmetric nature of the changes in India VIX with respect to market returns. S&P CNX NIFTY Index has been used as a proxy for the market and the study period covers March 2009 through November 2011. Using OLS Regression method on daily data this study finds an inverse relation between movements in India VIX and movements in the NIFTY. The study reveals the asymmetric nature of the Volatility Index-Market Return relationship. This study is useful for understanding the behavior of India VIX and helps policymakers in the design of appropriate instruments based on India VIX for hedging and risk management.