OBX-VIX: The predictability of OBX returns and asymmetric relationship between implied volatility and returns

Abstract

In this paper, we have constructed an implied volatility index for the Norwegian equity market (OBX-VIX). We have tested its properties and have used it to look at the asymmetric relationship between implied volatility and equity returns. The sample period for our analysis spans an extensive period, from 2007 to 2020, to capture multiple financial downturns. We find evidence that OBX-VIX can predict movements in OBX, and OBX is a predictor of movements in OBX-VIX.