Extreme spillovers of ⅥⅩ fear index to international equity markets

摘要

This study analyzes the impact of ⅥⅩ spillovers on market activities during extreme market conditions in 42 international equity markets from 1998 to 2014. Specifically, tail cross-dependence suggests that a small change in VIX significantly influences global market activities during extreme market conditions. The impact of ⅥⅩis asymmetric, which is more pronounced in bearish, highly volatile, and low trading volume markets. Moreover, ⅥⅩ spillovers exhibit a stronger impact on returns in developed markets and on volatility in emerging markets. In terms of geographical location, the impact of ⅥⅩ spillovers is more pronounced on returns in Europe and on volatility in Latin America. These findings indicate that international investors can potentially benefit from international portfolio diversification and can serve as useful guidance to policymakers in designing appropriate policies.