U.S. Market Uncertainty and Swedish Equity Volatility : A Next-Day Predictive Analysis, 2009–2025

Sammanfattning

This thesis examines whether U.S. market uncertainty, measured by the CBOE Volatility Index (VIX), predicts next-day equity volatility in Sweden over the period 2009–2025. Sweden provides an informative case as a small, open, and financially integrated economy that is likely to be exposed to external risk conditions. Using daily data for the OMXS30, the VIX, and the SEK per USD exchange rate, the analysis estimates reduced-form predictive regressions with lagged U.S. uncertainty, domestic volatility persistence, and exchange-rate movements, using Newey–West standard errors to account for autocorrelation and heteroscedasticity. State dependence is examined by allowing the relationship to di!er between calm and high-risk periods, and rolling-window estimates are used to document time variation in the VIX coe"cient over the full sample. The results show that lagged VIX is positively and statistically significantly associated with next-day Swedish equity volatility. This relationship remains strong when SEK/USD movements are included, indicating that the predictive content of the VIX is not primarily absorbed by the short-horizon safe-haven exchange-rate channel. The association is also substantially stronger during periods of elevated global risk, a pattern that intensifies around the European sovereign debt crisis and the COVID-19 turmoil, suggesting that Swedish equity volatility becomes more sensitive to external risk signals in stress periods. The findings imply that the VIX contains incremental shorthorizon predictive information for Swedish volatility and may serve as a timely external indicator for risk monitoring. A falsification test further supports the interpretation that this predictive content is specific to the forward-looking content of the VIX rather than a reflection of past U.S. market volatility. At the same time, the results should be interpreted as predictive associations rather than evidence of a single causal transmission mechanism.