The Research On The Relationship Between Stock Returns And Volatility Index

CBOE launched VIX,the first volatility index,in 1993.Since the birth of VIX,the research on it has never stopped.However,due to various reasons,the development of Chinese stock options market has been slightly slow.On November 28,2016,China finally officially launched the first Chinese volatility index,iVX.Based on this background,this paper studies the relationship between stock returns and volatility index.The paper starts from the threshold of volatility index,hoping to propose new investment strategies for the investors while enrich the domestic research results of volatility index.First,this paper introduces the significance and background of the research topic,summarizes the theories about volatility index,the relationship between stock returns and volatility index,the STAR model.Then it introduces the method of compiling the volatility index,and analyzes the relationship between the stock returns and the volatility index and the correlation between the stock returns and its historical data to lay the theoretical foundation for the model establishment.In the following section,we introduce the relevant model theory and estimation method which we need in this paper.Including VAR model,STAR and its derived model.Then the paper studies the relationship between S&P500 and VIX,January 2 2004 to January 13 2017,and the relationship between SSZ50 Index and iVX,February 10 2015 to January 13 2017.First the stability of the STAR model is determined,and then the optimal lag order of the STAR model is determined.Next,the relationship between the stock returns and the volatility index is established by using the STAR model.Time interval between the volatility index and the stock yield is adjusted too.For testing whether the relationship between the stock rate of return will be changed when the volatility index in the stock market performs different functions.The relationship between the stock returns and the volatility index in the Chinese and American markets is obtained through analysis.Finally,this paper compares the model parameters of the market in China and the United States,sums up the differences between the two countries and puts forward the possible reasons for the differences.This paper concludes that the stock returns on the day of the sustainable US market is negatively correlated with the previous day's stock yield,with less information impact of two to three trading days ahead of time..In the US stock market with fluctuation,the stock returns to the previous day are negative correlation with the one on the day,and the previous two to three days of stock returns are also related to the degree of higher and higher.The degree of correlation is the non-linear function of VIX.The stock returns on the day when the Chinese market is steady are positively related to the previous day's stock returns,and the positive correlation is weakened or even negative.Finally,in the analysis of the differences between the two countries,this paper puts forward: Chinese immature stock option market,the different information transmission efficiency of the two countries,the general lack of rationality of Chinese investors' investment behavior and the speculative speculation in the Chinese market Behavior are the cause of the differences between the two models.According to the above analysis,we get the following policy recommendations: We should adjust the threshold of Chinese stock options market,speed up the volatility index and its derivatives research,strengthen investor education.