Does VIX scare stocks of tourism companies?

Abstract

In the recent time, there has been increasing importance of tourism development to the global economic dynamics inspite of the global uncertainties. In this regard, the current study is aimed to find out if the volatility index (VIX) affects the returns of the firms operating in the tourism sector in 11 countries. The relationship between the variables in the study was tested through causality and cointegration tests. As a result, the change in the VIX was found to have causality towards the change in the tourism indices of the countries except for the USA and Sri Lanka. In addition, it was found that there was a long-term relationship between the variables and that the increase in VIX caused a decrease in the return of tourism indices. Hence, the current study offers significant policy direction for the tourism industry operations and the government of the examined destination countries.