How does stock market volatility react to NVIX? Evidence from developed countries

This paper investigates the role of news implied volatility (NVIX), a measure of uncertainty, in long-term stock market volatility in developed markets. The results showed that NVIX has a positive and significant impact on stock market variances in the full sample period using the GARCH-MIDAS model. Furthermore, out-of-sample forecasting results showed that including NVIX generally improves forecasting performance; that is, the GARCH-MIDAS model, with the long-term component driven by realized volatility (RV) and NVIX, outperforms those with only RV in terms of forecasting performance.