An Empirical Examination of VIX Market Fluctuations

Abstract This study investigates the impacts of the Standard & Poor’s (S&P) 500 Index, the NASDAQ Volatility Index (VXN), the spot prices of gold and silver, and the U.S. Dollar Index (DXY) on the CBOE Volatility Index (VIX). Specifically, the proposed arbitrage pricing theory (APT) model, programmed by Python, performs multi-factor regression analysis that analyzes the degree of impact measured by the beta coefficient of systematic risks on each factor. Our samples include daily transaction data from 2007 to 2018, divided into three periods to assess the VIX’s impact for each sub-period. The three periods are entitled as the “Global Financial Crisis Period” (2007–2009), the “European Debt Crisis Period” (2010–2012), and the “Follow-up Period” (2013–2018). Empirical results show that the major factors are the S&P 500 index and the VXN, with the DXY being a minor factor. Moreover, both gold and silver spot prices have a significant impact on the VIX. Keywords: VIX, Global financial crisis, European debt crisis, Systematic risk, Arbitrage pricing theory, Multi-factor regression model, Schwarz's inequality, Triangle inequality.