The volatility spillover effects among risk appetite indexes: insight from the VIX and the rise

Abstract

This study aims to test the volatility spillover effects among the global risk appetite, the VIX (also known as the fear index) and the RISE index (known as the indicator of investor risk appetite index in Turkey). A temporary or permanent causality Granger and Breitung Candelon (Breitung and Candelon in J Econom 132(2):363–378, 2006) frequency domain causality analyses were performed by using the weekly dataset spanning from January 2010 to December 2018. The results obtained from the study reveals a unilateral causal relationship running from the VIX toward the RISE index. This causality inference is also observed separately in the short-, medium- and the long-run. Consequently, the investigation found that there is a permanent causal relationship running from the VIX toward the RISE index. These results also indicate the existence of the volatility spillover effect among the risk appetite indexes. Consequently, the current study offers significant policy directives from the side of the government and other stakeholders especially that are targeted at mitigating fear factors in the economy.

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Acknowledgements

The author declares that he has no relevant or material financial interests that relate to the research described in this paper. We thank the editor and anonymous referees for their constructive comments, which greatly improved the quality of the paper.

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Saffet AKDAG- Assistant Professor Saffet AKDAG was responsible for the data collection and estimation. Ömer İSKENDEROGLU- On his own part, Assistant Professor Ömer İSKENDEROGLU contributed to the writing and formatting the manuscript in accordance to journal requirement. Andrew Adewale ALOLA- In addition to making significant contribution in the aspect of writing, Assistant Professor Andrew Adewale ALOLA was significantly responsible for the language editing and corresponding with the journal.

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Correspondence to Andrew Adewale Alola.

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Akdag, S., İskenderoglu, Ö. & Alola, A.A. The volatility spillover effects among risk appetite indexes: insight from the VIX and the rise. Lett Spat Resour Sci 13, 49–65 (2020). https://doi.org/10.1007/s12076-020-00244-3

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Keywords

  • Risk appetite
  • Volatility spillover effects
  • Frequency domain causality

JEL Classification

  • C22
  • C61
  • D81