Towards new volatility measures for the EU stock market

This paper analyzes the role of the VSTOXX volatility index as a measure of risk for the EU stock market. Employing daily data from 2007 to 2017, we study and contrast the properties of the VSTOXX index in various market conditions. Moreover, to investigate the information content of each country-specific index for the VSTOXX, we exploit the Ordered Weighted Averaging (OWA) operator, which provides a flexible aggregation procedure ranging between the minimum and the maximum of the input values. The VSTOXX index can correctly measure the volatility risk only for France and Germany, while the results depend on the period under investigation for the other countries. Moreover, VSTOXX acted more like an OR-like measure than an AND-like measure of volatility for the EU stock markets and represented an average for the EU volatility only during periods of extreme volatility.