Uncovering asymmetries in the relationship between fear and the stock market using a hidden co-integration approach

摘要: Abstract In this paper we implement the methodological approach of hidden co-integration in order to examine relationship between fear index and stock market index. To end, employ daily data S&P 500, FTSE 100 DAX 30 indices their respective implied volatility indices, i.e. CBOE VIX, Volatility Index VDAX New Index, for 2000–2014 period. Our empirical results indicate overall asymmetry reaction indicator innovations US market. For UK Germany our findings suggest existence specific types concerning mainly size time span adjustment process. The have important implications asset allocation, active investment hedging strategies.