Does CBOE Volatility Index Jumped or Located at a Higher Level Matter for Evaluating DJ 30, NASDAQ, and S&P500 Index Subsequent Performance

Does CBOE Volatility Index Jumped or Located at a Higher Level Matter for Evaluating DJ 30, NASDAQ, and S&P500 Index Subsequent Performance

Nowadays, the VIX index has become the most popular measure for the market’s expectation of volatility over the near-term future. Studies have addressed that the sharp movement in the VIX index might affect stock markets. However, the subsequent performances for stock markets when the VIX index jumps a relatively high point in a day or is located at a relatively high level remain unclear in the present literature. With the motivation to solve these puzzles, we conduct this study by taking “flow concern” and “stock concern” to evaluate the interaction among Dow Jones, NASDAQ, and S&P500 and VIX indices. The revealed results show that the subsequent performances for these stock indices would rise in a few days, but the above results would be reversed in a month. These findings might be beneficial for investors in evaluating DJ 30, NASDAQ, and S&P500 index subsequent performance while trading these index futures or index ETFs as the above VIX index phenomena occurred. Additionally, we argue that the above concerns in terms of investors’ panic and stock index performance, to our knowledge, seems rarely explored before and the outcomes of this study might enhance the robustness of the existing literature.