Reflexivity Theory rejects the basic assumption of the classical theory that financial markets totally and instantaneously absorb the information flow expressing an equilibrium price for each asset class. In this study we empirically investigate the presence of Reflexivity among Volatility Indices, Equity Indices and other economic and financial indicators, such as the US Economic Policy Uncertainty Index. We introduce a multi-step statistical model able to recognize stressed market periods and identify breakout points and short-term trend and reversal signals. We also investigate reverse causality and the response of our model to volatility shocks. Our conclusions are oriented towards a confirmation of Reflexivity Theory in the historical time series of listed Volatility Indices.
Bagato, L., Gioia, A., Mandelli, E., Reflexivity and Interactions in Modern Financial Markets: the Case of Volatility Indices, <<RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI>>, 2018; 2018 (3): 2-25. [doi:10.26350/000518_000013] [http://hdl.handle.net/10807/134073]
Reflexivity and Interactions in Modern Financial Markets: the Case of Volatility Indices
Bagato, Luca
Primo
;
2018
Abstract
Reflexivity Theory rejects the basic assumption of the classical theory that financial markets totally and instantaneously absorb the information flow expressing an equilibrium price for each asset class. In this study we empirically investigate the presence of Reflexivity among Volatility Indices, Equity Indices and other economic and financial indicators, such as the US Economic Policy Uncertainty Index. We introduce a multi-step statistical model able to recognize stressed market periods and identify breakout points and short-term trend and reversal signals. We also investigate reverse causality and the response of our model to volatility shocks. Our conclusions are oriented towards a confirmation of Reflexivity Theory in the historical time series of listed Volatility Indices.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.