An OWA Analysis of the VSTOXX volatility index

In this paper, we analyze the information value of the VSTOXX (volatility) index as a measure of risk for the EU stock market. Employing daily data from 2007 to 2017, we inspect and contrast the properties of the VSTOXX index under various market conditions and in high- and low-volatility periods. Moreover, to evaluate the contribution of each country-specific index to the VSTOXX index, we employ the Ordered Weighted Averaging (OWA) operator, which provides a flexible aggregation procedure ranging between the minimum and the maximum of the input values. We obtain a number of useful insights. The correlation between the VSTOXX index and the volatility indices is high during the entire period only for France and Germany. Moreover, the VSTOXX index acts more like an OR-like measure than as an AND-like measure of volatility for the EU stock markets and acts as an average only during periods of extreme volatility.