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The risk-return relation and VIX: Evidence from the S&P 500

Kanas, Angelos (2013) The risk-return relation and VIX: Evidence from the S&P 500. Empirical Economics, 44 (3). pp. 1291-1314. ISSN 0377-7332. (doi:10.1007/s00181-012-0639-4) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1007/s00181-012-0639-4

Abstract

A significantly positive risk-return relation for the S&P 500 market index is detected if the squared implied volatility index (VIX) is allowed for as an exogenous variable in the conditional variance equation of the parsimonious GARCH(1,1) model. This result holds for both daily and weekly observations, for extended conditional mean and variance specifications, and is robust to sub-samples. We show that the conditional variance obtained from the GARCH model with VIX has better predictive ability for realized volatility than the conditional variance from GARCH without VIX and VIX itself, thereby documenting an important information content of VIX for conditional variance. The results are interpreted as evidence that adding VIX squared in the conditional variance equation yields a better measure of conditional variance which, subsequently, uncovers a strong risk-return relation. © 2012 Springer-Verlag Berlin Heidelberg.

Item Type: Article
DOI/Identification number: 10.1007/s00181-012-0639-4
Additional information: Unmapped bibliographic data: AD - Department of Economics, University of Piraeus, Piraeus, Greece [Field not mapped to EPrints] JA - Empir. Econ. [Field not mapped to EPrints]
Uncontrolled keywords: GARCH-M, Predictive ability, Risk-return relation, S&P 500, VIX, numerical model, risk factor, stock market, variance analysis
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 22 May 2014 11:13 UTC
Last Modified: 29 May 2019 12:36 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41127 (The current URI for this page, for reference purposes)
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