1;Acknowledgements;6 2;Content;7 3;List of Acronyms and Abbreviations;9 4;List of Figures;10 5;List of Tables;11 6;List of Equations;11 7;1 Introduction;12 7.1;1.1 Problem Statement;13 7.2;1.2 Research Objective;13 7.3;1.3 Research Structure;14 8;2 Methodology;15 8.1;2.1 Research Design;15 8.2;2.2 Literature Review;16 8.3;2.3 Quantitative Research;17 8.3.1;2.3.1 Granger Causality Test Input:;19 8.4;2.4 Qualitative Research;25 9;3 Risk and Emotions;28 10;4 Financial Market Volatility;30 10.1;4.1 Current Trends and Latest News;30 10.2;4.2 Definitions, Sources and Measures of Volatility;32 10.3;4.3 Volatility Characteristics and Stylized Facts;35 10.4;4.4 Predictability of Future Volatility;37 10.5;4.5 Volatility Types;37 10.5.1;4.5.1 Implied Volatility;38 10.5.2;4.5.2 Realized Volatility;40 10.5.3;4.5.3 Stochastic Volatility;40 10.5.4;4.5.4 Comparison of Volatility Types;41 11;5 Behavioural Finance;44 11.1;5.1 Efficient Market Hypothesis and Behavioural Finance: A Description;44 11.2;5.2 Efficient Market Hypothesis: Critique;45 12;6 VIX Index;48 12.1;6.1 An Introduction to the "Investor Fear Gauge";48 12.2;6.2 Applications and Strategies;52 12.3;6.3 Critical Evaluation and Predictive Performance of the VIX;56 12.3.1;6.3.1 Implied Volatility and the Assumption of Constant Volatility;56 12.3.2;6.3.2 Asymmetry of Daily Changes;57 12.3.3;6.3.3 The VIX Index vs. the CSFB Index;58 12.3.4;6.3.4 Performance of a Probabilistic Interpretation;61 12.3.5;6.3.5 VIX Manipulation;62 13;7 Empirical Results;64 13.1;7.1 Quantitative Research;64 13.1.1;7.1.1 Descriptive Analysis;64 13.1.2;7.1.2 Granger Causality Test;68 13.2;7.2 Qualitative Research;71 14;8 Discussion;75 15;9 Conclusion;78 16;Appendix;80 16.1;Source Code of R Module;92 17;10 List of References;96