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Article

Dynamic Responses of Major Equity Markets to the US Fear Index

by
Bahram Adrangi
1,*,
Arjun Chatrath
2,
Joseph Macri
3 and
Kambiz Raffiee
4
1
W.E. Nelson Professor of Financial Economics, University of Portland, 5000 N. Willamette Blvd., Portland, OR 97203, USA
2
Shulte Professor of Finance, Pamplin School of Business, University of Portland, 5000 N. Willamette Blvd., Portland, OR 97203, USA
3
Department of Economics Macquarie, University North Ryde, Sydney, NSW 2109, Australia
4
Foundation Professor of Economics, College of Business, University of Nevada, Reno, NV 89557, USA
*
Author to whom correspondence should be addressed.
J. Risk Financ. Manag. 2019, 12(4), 156; https://doi.org/10.3390/jrfm12040156
Submission received: 25 July 2019 / Revised: 18 September 2019 / Accepted: 19 September 2019 / Published: 25 September 2019
(This article belongs to the Special Issue International Financial Markets)
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Abstract

This study examines the reaction of four major equity markets of the world to the US equity market fear index, i.e., the Chicago Board of Trade Volatility Index (VIX). The VIX is designed to perform as a leading indicator of the volatility in equity markets. Our paper examines the daily data for the period of 2013 through 2018. We find that during this period there were three significant breaks in the data. Impulse responses from the structural vector autoregressive model estimation show that, in the first and second subperiods that cover from 6/2013 through 5/2016, equity market volatility in the US, UK, France, and Germany responded to structural shocks to the VIX. Nonlinear Granger causality tests confirm these findings. However, in the post Brexit-vote era, equity indices neither react to VIX structural shocks nor are caused by these shocks.
Keywords: volatility; international equity markets; structural vector autoregression; GARCH models; causality volatility; international equity markets; structural vector autoregression; GARCH models; causality

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MDPI and ACS Style

Adrangi, B.; Chatrath, A.; Macri, J.; Raffiee, K. Dynamic Responses of Major Equity Markets to the US Fear Index. J. Risk Financ. Manag. 2019, 12, 156. https://doi.org/10.3390/jrfm12040156

AMA Style

Adrangi B, Chatrath A, Macri J, Raffiee K. Dynamic Responses of Major Equity Markets to the US Fear Index. Journal of Risk and Financial Management. 2019; 12(4):156. https://doi.org/10.3390/jrfm12040156

Chicago/Turabian Style

Adrangi, Bahram, Arjun Chatrath, Joseph Macri, and Kambiz Raffiee. 2019. "Dynamic Responses of Major Equity Markets to the US Fear Index" Journal of Risk and Financial Management 12, no. 4: 156. https://doi.org/10.3390/jrfm12040156

APA Style

Adrangi, B., Chatrath, A., Macri, J., & Raffiee, K. (2019). Dynamic Responses of Major Equity Markets to the US Fear Index. Journal of Risk and Financial Management, 12(4), 156. https://doi.org/10.3390/jrfm12040156

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