The Information Content of TAIEX Options Implied Volatility Index—Empirical Study of New VIX
Date Issued
2004
Date
2004
Author(s)
Chiang, Mu-Wei
DOI
zh-TW
Abstract
In 1993, the Chicago Board Options Exchange (CBOE) introduced the Market Volatility Index (VXO) which measures market expectations of near term volatility conveyed by stock index market. VXO is often referred to as the “investor fear gauge”. VXO provides a real-time, standard and simple estimate of short-term market volatility. It is quickly followed and has been cited in hundreds of investors. Other countries have developed the volatility index for their own markets based option implied volatility as well. This article makes a description of the market volatility indices which were introduced by CBOE in 1993 and 2003/9(VIX and VXO). Besides we compare the empirical study of the different indices and examine the relationship between VIX/VXO and TAIEX.
We focus on the July 1 2002-March 31 2004 time period. The conclusions are as follows：
1. There is a negative and asymmetry relationship between the contemporaneous changes in the stock index and implied volatility indices. The indices are more sensitive to the decrease of the stock index than the increase.
2. The sensitivity and the prediction of short-term market volatility on VXO are better than on VIX. VXO has mean-reverting effect but VIX don’t.
3. There isn’t an obvious expiration effect of VIX and VXO. But the paper shows the different results in intraweek effect.
4. Volatility index could be a useful trading signal when the market dropped. Positive forward looking returns are to be expected for long positions in the stock index triggered by relative high levels of the implied volatility indices.
Subjects
波動率
波動率指標
volatility
volatility index
VIX
VXO
Type
thesis
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