On the relationship between implied volatility index and stock return index
DOI:
https://doi.org/10.5007/2175-8069.2021.e77707Keywords:
Reality, Identity, Truth, ValueAbstract
This study investigated the relationship between the Ibovespa returns and the implied volatility index in Brazil (IVol-BR). We analyzed whether the level of the IVol-BR is related to the present and future Ibovespa returns. OLS and quantile regressions were used to investigate possible differences in the relationships along the distribution of the IVol-BR. To test the robustness of the model, we applied an alternative proxy for volatility, estimated from a GARCH (1,1) model. An asymmetrical relationship was found in Brazilian investors’ response to different moments of market volatility, suggesting that negative Ibovespa returns have a stronger relationship with the IVol-BR than positive returns. The coefficients were higher at the extremes of the IVol-BR distribution. These results suggest that the Brazilian market reacts more strongly to bad news than to good news, in line with the ideas developed in the behavioral finance field.
References
Angrist, J. D., & Pischke, J.-S. (2009). Mostly Harmless Econometrics: An Empiricist’s Companion. Princeton University Press.
Astorino, E., Chague, F., Giovannetti, B. C., & Silva, M. E. (2017). Variance Premium and Implied Volatility in a Low-Liquidity Option Market. Revista Brasileira de Economia, 71(1), 3-28. https://doi.org/10.5935/0034-7140.20170001
Bagchi, D. (2012). Cross‐sectional analysis of emerging market volatility index (India VIX) with portfolio returns. International Journal of Emerging Markets, 7(4), 383–396. https://doi.org/10.1108/17468801211264306
Banerjee, P. S., Doran, J. S., & Peterson, D. R. (2007). Implied volatility and future portfolio returns. Journal of Banking & Finance, 31(10), 3183-3199. http://dx.doi.org/10.1016/j.jbankfin.2006.12.007
Bodie, Z., Kane, A., & Marcus, A. J. (2015). Investimentos. AMGH editora
Cainelli, P. V., Pinto, A. C. F., Klötzle, M. C. (2021). Estudo sobre a relação entre o IVol-BR e os retornos futuros do mercado acionário brasileiro. Revista Brasileira de Contabilidade & Finanças - USP, São Paulo, v. 32, n. 86, p. 255-272, maio/ago. 2021. https://doi.org/10.1590/1808-057x202009890
Campbell, J. Y., & Shiller, R. J. (1998). Valuation Ratios and the Long-Run Stock Market Outlook. The Journal of Portfolio Management, 24(2), 11-26. https://doi.org/10.3905/jpm.24.2.11
Duppati, G., Kumar, A. S., Scrimgeour, F., & Li, L. (2017). Long memory volatility in Asian stock markets. Pacific Accounting Review, 29(3), 423–442. https://doi.org/10.1108/PAR-02-2016-0009
Engle, R. F. (1982). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation. Econometrica, 50(4), 987-1007. https://doi.org/10.2307/1912773
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383–417. https://doi.org/10.2307/2325486
Friedman, M., & Savage, L. J. (1948). The Utility Analysis of Choices Involving Risk. Journal of Political Economy, 56(4), 279–304. https://doi.org/10.1086/256692
Giot, P. (2005). Relationships Between Implied Volatility Indexes and Stock Index Returns. The Journal of Portfolio Management, 31(3), 92-100. https://doi.org/10.3905/jpm.2005.500363
Guiso, L., Sapienza, P., & Zingales, L. (2018). Time varying risk aversion. Journal of Financial Economics, 128(3), 403–421. https://doi.org/10.1016/j.jfineco.2018.02.007
Gujarati, D. N., & Porter, D. C. (2011). Econometria Básica. AMGH editora.
Imas, A. (2016). The Realization Effect: Risk-Taking After Realized Versus Paper Losses. American Economic Review, 106(8), 2086–2109. https://doi.org/10.1257/aer.20140386
Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263–291. https://doi.org/10.2307/1914185
Lee, Y. –H. (2015). Does the US Fear Gauge Impact on the Investor Fear Gauge in the Emerging Markets? Journal of Emerging Market Finance, 14(3), 197-209. https://doi.org/10.1177%2F0972652715601909
Li, J., Yu, X., & Luo, X. (2019). Volatility Index and the return–volatility Relation: Intraday Evidence from Chinese Options Market. Journal of Futures Markets, 39(11), 1348-1359. https://doi.org/10.1002/fut.22012
Lo, A. W. (2004). The Adaptive Markets Hypothesis. The Journal of Portfolio Management, 30(5), 15–29. https://doi.org/10.3905/jpm.2004.442611
Markowitz, H. (1952). Portfolio Selection. The Journal of Finance, 7(1), 77-91. https://doi.org/10.1111/j.1540-6261.1952.tb01525.x
Mello, A. R. A. F. (2009). Volatilidade implícita das opções de ações: uma análise sobre a capacidade de previsão do mercado sobre a volatilidade futura. Dissertação de Mestrado, Fundação Getúlio Vargas, São Paulo, SP, Brasil.
Moraes, A. S. M. D., Pinto, A. C. F., & Klotzle, M. C. (2015). Previsão de value-at-risk e expected shortfall para mercados emergentes usando modelos FIGARCH. Brazilian Review of Finance, 13(3), 394-437-394–437. https://doi.org/10.12660/rbfin.v13n3.2015.53080
Pinho, F. M., Camargos, M. A., & Figueiredo, J. M. (2017). Uma Revisão da Literatura sobre Modelos de Volatilidade em Estudos Brasileiros de 2000 a 2014. Revista de Administração FACES Journal, 16(1), 9-28. http://dx.doi.org/10.21714/1984-6975FACES2017V16N1ART3213
Rubbaniy, G., Asmerom, R., Rizvi, S. K. A., & Naqvi, B. (2014). Do fear indices help predict stock returns? Quantitative Finance, 14(5), 831–847. https://doi.org/10.1080/14697688.2014.884722
Smales, L. A. (2016). Risk-on/Risk-off: Financial market response to investor fear. Finance Research Letters, 17, 125-134. https://doi.org/10.1016/j.frl.2016.03.010
Taleb, N. N. (2010). The Black Swan: the impact of the highly improbable. Random House Trade editora.
Thurner, S., Farmer, J. D., & Geanakoplos, J. (2012). Leverage causes fat tails and clustered volatility. Quantitative Finance, 12(5), 695–707. https://doi.org/10.1080/14697688.2012.674301
Vicente, J. V. M., & Guedes, T. S. (2010). A Volatilidade implícita contém informações sobre a volatilidade futura? Evidências do mercado de opções de ações da Petrobras. Brazilian Business Review, 7(1), 48-65. http://dx.doi.org/10.15728/bbr.2010.7.1.3
Whaley, R. E. (2000). The Investor Fear Gauge. The Journal of Portfolio Management, 26(3), 12-17. https://doi.org/10.3905/jpm.2000.319728
Published
How to Cite
Issue
Section
License
Os Direitos Autorais para artigos publicados neste periódico são do autor, com direitos de primeira publicação para a Revista. Em virtude de aparecerem nesta Revista de acesso público, os artigos são de uso gratuito, com atribuições próprias, em aplicações educacionais, de exercício profissional e para gestão pública. A Revista adotou a licença Creative Commons Atribuição 4.0 Internacional - CC BY NC ND. Esta licença permite acessar, baixar (download), copiar, imprimir, compartilhar, reutilizar e distribuir os artigos desde que com a citação da fonte, atribuindo os devidos créditos de autoria. Nesses casos, nenhuma permissão é necessária por parte dos autores ou dos editores. Autores têm autorização para assumir contratos adicionais separadamente, para distribuição não-exclusiva da versão do trabalho publicada nesta revista (ex.: publicar em repositório institucional ou um capítulo de livro).
Esta obra está licenciada sob uma Licença Creative Commons.
