Dynamic Responses of Standard and Poor’s Regional Bank Index to the U.S. Fear Index, VIX

Abstract

This study examines the reaction of the Standard and Poor’s Regional Bank Index (SPRB) to the U.S. equity market fear index (i.e., the Chicago Board of Trade Volatility Index [VIX]). The VIX is designed to perform as a leading indicator of the volatility in equity markets. However, practitioners observe many periods of divergence between the VIX and S&P 500. Our paper examines the daily data for the period of 2009 through 2019. We show that once the effects of consumer confidence and capacity utilization are accounted for, there is a negative association between the VIX and regional bank performance.

Volatility impacts on the European banking sector: GFC and COVID-19

“…Overall, the VIX plays a major role in risk management, especially for large international banks whose asset portfolios are more likely to be affected by international price shocks, as occurred during COVID-19 (Adrangi et al, 2021;Jeris & Nath, 2021). The current financial and banking market turmoil fueled by COVID-19 has added to investor concerns over its duration and broader market impact, such as potential distress and bankruptcy (e.g.…”

The Influence of Equity Market Sentiment on Credit Default Swap Markets: Evidence from Wavelet Quantile Regression

“…Due to the advantages of the SE index mentioned above, it has been used by a great number of studies concerning the infuence of investor sentiment on the fnancial market [37,[48][49][50][51]. Te VIX index is well known as an "investor fear gauge" by practitioners, which refects the investor sentiment of fear in the U.S. equity market [52][53][54][55][56]. Te greater the fear, the higher the VIX level is.…”