Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/167520 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6534
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper investigates the degree of persistence of market fear. Specifically, two different long-memory approaches (R/S analysis with the Hurst exponent method and fractional integration) are used to analyse persistence of the VIX index over the sample period 2004-2016, as well as some sub-periods (pre-crisis, crisis and post-crisis). The findings indicate that its properties change over time: in normal periods it exhibits anti-persistence (there is a negative correlation between its past and future values), whilst during crisis period the level of persistence is increasing. These results can be informative about the nature of financial bubbles and anti-bubbles, and provide evidence on whether there exist market inefficiencies that could be exploited to make abnormal profits by designing appropriate trading strategies.
Subjects: 
market fear
VIX
persistence
long memory
R/S analysis
fractional integration
JEL: 
C22
G12
Document Type: 
Working Paper
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