Revista Ingenierías Universidad de Medellín
Print version ISSN 1692-3324
ALVAREZ FRANCO, Pilar Beatriz; RESTREPO, Diego Alexánder and PEREZ, Fredy Ocaris. STUDY OF ASYMMETRIC AND DAY OF THE WEEK EFFECTS IN 'VIX'* VOLATILITY INDEX. Rev. ing. univ. Medellin [online]. 2007, vol.6, n.11, pp. 126-147. ISSN 1692-3324.
In this work, we study asymmetric and day of the week effects in the Chicago Board Option Exchange's Volatility Index -VIX- from 01/02/2003 to 03/302007. We use GARCH models assuming Gaussian, t-Student and Generalized Error Distribution (GED) innovations. To Gaussian innovations, we use the Quasi-Maxima-Likelihood Method. The results show evidence in favor of asymmetric and day of the week effects. An EGARCH model with GED errors and a TGARCH model with t-Student Distribution fit well the data. We used exogenous variables for the mean of the process, representing the first day of the week, to explore the day of the week effects. Our results suggest that on Mondays the market volatility is higher than in other days. This supports the thesis that returns are negatively correlated with volatility.
Keywords : GARCH Models; Asymmetric Effects; Day of the Week Effect; Volatility Index; VIX.