Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
Series Vol. 59 , 05 January 2024
Open
Access | Article
The Impact Caused by the U.S. Increasing Real Interest Rate on Volatility Index
* Author to whom correspondence should be addressed.
Abstract
This paper mainly focuses on the impact of the US interest rate hike on the volatility index after March 16, 2020. In this article, daily, weekly, and monthly volatility index data from 2010 to 2022 are extracted and the ARIMA model was used to determine and analyze the difference between actual value and fitted value of volatility index after increased rate. The study forecasts the effect of rate hikes on volatility index in short-, medium-, and long-term perspective. According to the ARIMA model, the interest rate hike has the greatest impact on the volatility index in the medium term, which is not obvious in the short term, and the impact of interest rate hike gradually decreases in the long term, and finally returns to the normal trend. Compared with other studies on the impact of interest rate hike on the overall economic activity, this paper only focuses on the impact of interest rate hike on the volatility index. Through the research of this paper, the policy makers can adjust the rate of interest rate hike according to the speed and amplitude of investors' response to the policy, so as to produce turbulence and panic on the stock market to a minimum extent.
Keywords
COVID-19 pandemic, Volatility Index, Real interest rate, U.S. Economy, ARIMA Model
References
1. Cox, J. (2023). Retrieved from https://www.cnbc.com/2023/03/16/one-year-after-the-first-rate-hike-the-fed-stands-at-policy-crossroads.html
2. Claes, A. G., De Ceuster, M. J., Lópezc, R., & Navarroc, E. (2010). Constructing the US interest rate volatility index. Working paper, University of Antwerp.
3. Ghosh, S. (2022). COVID-19, clean energy stock market, interest rate, oil prices, volatility index, geopolitical risk nexus: evidence from quantile regression. Journal of Economics and Development, 24(4), 329-344.
4. Daniali, S. M., Barykin, S. E., Kapustina, I. V., Mohammadbeigi Khortabi, F., Sergeev, S. M., Kalinina, O. V., ... & Senjyu, T. (2021). Predicting volatility index according to technical index and economic indicators on the basis of deep learning algorithm. Sustainability, 13(24), 14011.
5. Parizad Phiroze Dungore, Sarosh Hosi Patel, Analysis of Volatility Volume and Open Interest for Nifty Index Futures Using GARCH Analysis and VAR Model, International Journal of Financial Studies, 10.3390/ijfs9010007, 9, 1, (7), (2021)Kuepper, J. (2023) Retrieved form https://www.investopedia.com/terms/v/vix.asp
6. Susheng, W. A. N. G., & Zhen, Y. (2014). The dynamic relationship between volatility, volume and open interest in CSI 300 futures market. WSEAS Transactions on Systems, 13, 1-11.
7. Girma, P. B., & Mougoue, M. (2002). An empirical examination of the relation between futures spreads volatility, volume, and open interest. Journal of Futures Markets: Futures, Options, and Other Derivative Products, 22(11), 1083-1102.
8. LeBaron, B. (1992). Forecast improvements using a volatility index. Journal of Applied Econometrics, 7(S1), S137-S149.
9. Liberto, D. (2023). https://www.investopedia.com/terms/f/fear-and-greed-index.asp
10. Wang, Y. C., Tsai, J. J., & Lu, W. (2014). The impact of volatility index on China's stock market. Journal of Business & Economics, 6(1), 23.
11. Data source: VIX Volatility Index historical data: Index history, chart _ Yingwei Financial Situation (investing.com)
Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).
- Volume Title
- Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
- ISBN (Print)
- 978-1-83558-209-1
- ISBN (Online)
- 978-1-83558-210-7
- Published Date
- 05 January 2024
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/59/20231053
- Copyright
- 05 January 2024
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited