A first look at the properties of India's volatility index

The purpose of this paper is to examine the statistical properties of the volatility index of India, India Vix (Ivix), its relationship with the Indian stock market and its predictive power for forecasting future variance. Further, the paper examines the volatility transmission between India and developed markets. The results of the study show that Ivix returns are negatively related to stock market returns and the leverage effect is only significant around the middle of the joint distribution. The asymmetric response of Ivix is also not observed in the left tail and is significant again around the centre of the distribution. Monthly volatility forecasts obtained from Ivix contain important information about future market volatility. Finally, overnight volatility movements from the US market have significant effect on the Indian market's volatility and transmission in opposite direction was not observed.