India VIX: Examining the Negative and Asymmetric Volatility Index – Market Return Relationship

18 Pages Posted: 6 Jun 2012 Last revised: 26 Jan 2016

See all articles by Gangineni Dhanaiah

Gangineni Dhanaiah

Acharya Nagarjuna University

Raghunatha Reddy

Jawaharlal Nehru University

Dr. Prasad

affiliation not provided to SSRN

Date Written: June 5, 2012

Abstract

This paper examines the behavior of India Volatility Index (India VIX). We study two aspects: First, the negative correlation between changes in India VIX and market returns. Second, the asymmetric nature of the changes in India VIX with respect to market returns. S&P CNX NIFTY Index has been used as a proxy for the market and the study period covers March 2009 through November 2011. Using OLS Regression method on daily data this study finds an inverse relation between movements in India VIX and movements in the NIFTY. The study reveals the asymmetric nature of the Volatility Index-Market Return relationship. This study is useful for understanding the behavior of India VIX and helps policymakers in the design of appropriate instruments based on India VIX for hedging and risk management.

Suggested Citation

Dhanaiah, Gangineni and Reddy, Raghunatha and Prasad, T. N. L., India VIX: Examining the Negative and Asymmetric Volatility Index – Market Return Relationship (June 5, 2012). Available at SSRN: https://ssrn.com/abstract=2078164 or http://dx.doi.org/10.2139/ssrn.2078164

Gangineni Dhanaiah (Contact Author)

Acharya Nagarjuna University ( email )

Guntur
522510
India
9391319721 (Phone)
09391319721 (Fax)

HOME PAGE: http://www.dhanfinacademy.com

Raghunatha Reddy

Jawaharlal Nehru University ( email )

Vasant Vihar
Jawaharlal Nehru University
Hyderabad, DE Delhi 500072
India

T. N. L. Prasad

affiliation not provided to SSRN

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