Vaasan yliopiston opinnäytteet

Kauppatieteellinen tiedekunta, 2017

Rajoitettu
Opinnäytteen kokoteksti
luettavissa vain
Tritonian työasemilla

Riipinen, Timi

Option implied volatility and stock market return linkage: evidence from the U.S. and Europe

Ohjaaja/Valvoja (DI):
Janne Äijö
Tutkinto:
Kauppatieteiden maisteri
Pääaine:
Laskentatoimi ja rahoitus
Koulutusohjelma:
Master's Degree Programme in Finance
Tutkielman kieli:
Englanti
Sivumäärä:
68
The purpose of this thesis is to investigate the contemporaneous relationship between implied volatility and stock market returns in two continents: Europe and the U.S. The data consists of four European implied volatility indices: VDAX, VSTOXX, VSMI, VFTSE and their respective stock market indices: DAX, ESTOXX, SMI and FTSE 100. The U.S. data includes CBOE volatility index VIX and its respective stock market index S&P 500. The total time period is from 2.1.1990 to 9.5.2016 but the starting period changes depending on the index, as part of the indices were founded later.

The contemporaneous implied volatility and stock market return relation in different volatility sub-periods is examined using an ordinary least squares regression method. Further, dummy variables are added to the OLS model to examine the asymmetric nature of the underlying relationship. The forecasting power of implied volatility on stock market returns is examined using the OLS model familiar from the study by Giot (2005).

Results of this thesis provide consistent evidence with earlier literature. The results indicate a strong negative and statistically significant contemporaneous relationship between implied volatility and stock market returns. The underlying relationship is also asymmetric in nature and the extent of the asymmetric effect changes when moving between low and high volatility sub-periods. The results also provide evidence that very high levels of implied volatility predict positive future stock market returns.
Avainsanat:
Implied volatility
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