Predictive Ability of IVIX & Its Relation with Stock Market Returns
Abstract:- India volatility index, IVIX captures behavioral and psychological aspects of traders. The purpose of introducing IVIX is to avail new instrument for trading and hedge through it. It is believed that investors perception about the Nifty 50 in near term can be indicated using IVIX. Here an attempt is made to understand the relation between IVIX and market return using t–Test for r. The study also aims to understand the predictive ability of IVIX using t – test for slope, which can be helpful to the investors to take the decision. The study provided sufficient evidence that stock market returns are negatively associated with the Volatility Index. The negative correlation prevailing between IVIX and NIFTY 50, would give an opportunity to investors to use IVIX as a directional tool to know the future movement in NIFTY 50. The t – Test for slope finds that there is significant relationship between IVIX and NIFTY50 which implies that predictive ability of IVIX is high.
Authors: Prof. Mrityunjaya B. Chavannavar, Dr. S. C. Patil, Madhuri Dalavi
