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Asymmetric Effects of Volatility Risk on Stock Returns: Evidence from VIX and VIX Futures
Author(s) -
Fu Xi,
Sandri Matteo,
Shackleton Mark B.
Publication year - 2016
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21772
Subject(s) - economics , futures contract , volatility (finance) , financial economics , stock (firearms) , econometrics , stock market index , stock market , mechanical engineering , engineering , paleontology , horse , biology
First, to separate different market conditions, this study focuses on how VIX spot ( VIX ), VIX futures ( VXF ), and their basis ( VIX − VXF ) perform different roles in asset pricing. Secondly, this study decomposes the VIX index into two parts: volatility calculated from out‐of‐the‐money call options and volatility calculated from out‐of‐the‐money put options. The analysis shows that out‐of‐the‐money put options capture more useful information in predicting future stock returns. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 36:1029–1056, 2016