Cargando…
Can the Chinese volatility index reflect investor sentiment?
The volatility index is the implied volatility calculated inversely from the option prices. This study investigates whether the official Chinese volatility index, iVX, can represent investor sentiment. In order to describe investor sentiment comprehensively, we build a three-dimensional investor sen...
Autores principales: | , , |
---|---|
Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Published by Elsevier Inc.
2021
|
Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7573641/ http://dx.doi.org/10.1016/j.irfa.2020.101612 |
_version_ | 1783597486064009216 |
---|---|
author | Long, Wen Zhao, Manyi Tang, Yeran |
author_facet | Long, Wen Zhao, Manyi Tang, Yeran |
author_sort | Long, Wen |
collection | PubMed |
description | The volatility index is the implied volatility calculated inversely from the option prices. This study investigates whether the official Chinese volatility index, iVX, can represent investor sentiment. In order to describe investor sentiment comprehensively, we build a three-dimensional investor sentiment measurement system composed of macro, meso and micro level, and decompose iVX into three components to obtain short-term, medium-term fluctuations and long-term trend by EEMD method. The relationships between iVX, its components and sentiment indexes at each level have been analyzed separately, and the empirical results reveal all components of iVX can reflect the investor sentiment at the corresponding level but to which extent they can reflect are not the same. Further we introduce the mixed-frequency dynamic factor analysis to extract the common sentiment factor, which shows stronger correlation with contemporaneous iVX, compared with the sentiment indexes at each level. The ADL model in robustness check also demonstrates the results. Our findings confirm iVX can represent the common sentiment and expectations of Chinese investors in different time scales. |
format | Online Article Text |
id | pubmed-7573641 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2021 |
publisher | Published by Elsevier Inc. |
record_format | MEDLINE/PubMed |
spelling | pubmed-75736412020-10-20 Can the Chinese volatility index reflect investor sentiment? Long, Wen Zhao, Manyi Tang, Yeran International Review of Financial Analysis Article The volatility index is the implied volatility calculated inversely from the option prices. This study investigates whether the official Chinese volatility index, iVX, can represent investor sentiment. In order to describe investor sentiment comprehensively, we build a three-dimensional investor sentiment measurement system composed of macro, meso and micro level, and decompose iVX into three components to obtain short-term, medium-term fluctuations and long-term trend by EEMD method. The relationships between iVX, its components and sentiment indexes at each level have been analyzed separately, and the empirical results reveal all components of iVX can reflect the investor sentiment at the corresponding level but to which extent they can reflect are not the same. Further we introduce the mixed-frequency dynamic factor analysis to extract the common sentiment factor, which shows stronger correlation with contemporaneous iVX, compared with the sentiment indexes at each level. The ADL model in robustness check also demonstrates the results. Our findings confirm iVX can represent the common sentiment and expectations of Chinese investors in different time scales. Published by Elsevier Inc. 2021-01 2020-10-20 /pmc/articles/PMC7573641/ http://dx.doi.org/10.1016/j.irfa.2020.101612 Text en © 2020 Published by Elsevier Inc. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active. |
spellingShingle | Article Long, Wen Zhao, Manyi Tang, Yeran Can the Chinese volatility index reflect investor sentiment? |
title | Can the Chinese volatility index reflect investor sentiment? |
title_full | Can the Chinese volatility index reflect investor sentiment? |
title_fullStr | Can the Chinese volatility index reflect investor sentiment? |
title_full_unstemmed | Can the Chinese volatility index reflect investor sentiment? |
title_short | Can the Chinese volatility index reflect investor sentiment? |
title_sort | can the chinese volatility index reflect investor sentiment? |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7573641/ http://dx.doi.org/10.1016/j.irfa.2020.101612 |
work_keys_str_mv | AT longwen canthechinesevolatilityindexreflectinvestorsentiment AT zhaomanyi canthechinesevolatilityindexreflectinvestorsentiment AT tangyeran canthechinesevolatilityindexreflectinvestorsentiment |