The Effects of Financial Ratios on the Perceived Risk Count for Single Equity VIX

Abstract

Abstract The determinants of fear gauge from March 2005 to September 2019 are empirically examined with attention to the single equity volatility index (VIX). This study utilized Poisson and Negative Binomial Regressions to investigate the link between perceived risk count and its variables at certain levels of quantiles. The Negative Binomial model was chosen based on the highest log-likelihood value and the lowest the Akaike information criterion (AIC) value to analyze the market psychology condition of investors. The result of the return on equity (ROE), cash conversion cycle (CCC), and dividend payout ratio (DPR) are negatively significant in both medium and higher quantile of perceived risk count. The debt ratio and free cash flow (FCF) positively affect the perceived risk count. The impacts of variables on higher quantile have a greater influence on perceived risk count, followed by medium quantile. JEL classification numbers: G32. Keywords: Perceived Risk Count, Equity VIX, Poisson and Negative Binomial Regressions.