Examining Contemporaneous Relationship between Return of Nifty Index and India VIX
Published: 2015
Author(s) Name: Prasenjit Chakrabarti |
Author(s) Affiliation: Fellow Programme in Mgt (Finance and Acc), Indian Inst of Mgt Indore, Madhya Pradesh, India.
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Abstract
The study examines the contemporaneous relationship between Nifty returns and India VIX returns. Literature documents that the
relationship between them is negative and asymmetric. Building on this, the study considers the linear and quadratic effect of
stock index return (CNX Nifty) and examines the changes in implied volatility index (India VIX). The study finds both linear and quadratic CNX Nifty index returns are significant for changes in the level of India VIX. Findings suggest that India VIX provides
insurance both for downside market movement and size of the downside movement.
Keywords: Asymmetric Return, Implied Volatility, India VIX, CNX Nifty
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