An Analysis of the Relationship between Volatility Index and Stock Index ETF

• Main Authors: Tai-Lin Hsieh, 謝岱霖
• Other Authors: Chia-Lin Chang
• Format: Others
• Language: zh-TW
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/61791699678479511481

碩士 === 國立中興大學 === 應用經濟學系所 === 104 === As stock market indices are not tradable, the importance and trading volume of Exchange Traded Fund (ETF) cannot be understated. ETFs track an index and attempt to replicate the performance of a specific index. Numerous studies have demonstrated a strong relationship between the S&P500 index and the Volatility Index (VIX). However, few empirical studies have focused on the relationship between VIX and ETF returns. The purpose of the dissertation is to investigate whether VIX returns affect ETF returns. The dissertation uses vector autoregressive (VAR) models to determine whether daily VIX returns with different moving average processes affect ETF returns. The ARCH-LM test show conditional heteroskedasticity in the estimation of ETF returns. The diagonal BEKK model is used to accommodate the conditional heteroskedasticity in the VAR estimates of ETF returns. The dissertation uses daily data on ETF returns that follow different stock indices in the USA and Europe. The empirical results show that daily VIX returns: (1) have a significant negative effect on European ETF returns in the short run; (2) have a stronger significant effect on single market ETF returns than on European ETF returns; and (3) together with ETF returns on U.S. stocks, VIX returns are less significant than S&P500 returns.