Behavioral finance expands the predictive behavior of stock market volatility index

This study of behavioral finance is a new approach and it contradicts the neoclassical theory of finance based on EMH (Efficient market hypothesis). This study expands the relationship of volatility index and future market return. Six portfolios are made to study the predictive behavior of volatility index on the basis of hree volatility index parameters, which are stock beta, market to book value of equity and size(market capitalization). Hypothesis of this study is stated as volatility index has no significant positive effect on portfolio return. Multiple regression analysis is applied here to show the positive relationship between volatility index and portfolio return, which rejects the hypothesis. At the end conclusions are made with suggestions and remarks on volatility index predictive behavior of stock market.