Date of Award


Degree Type

Doctoral Dissertation

Degree Name

Doctor of Business Administration (DBA)


Jack Welch College of Business


In partial fulfillment of the requirements For the degree of Doctor of Business Administration in Finance Sacred Heart University, Jack Welch College of Business.

Dissertation Supervisor

Dr. Lucjan T. Orlowski


Our study shows that market-implied inflation expectations proxied by the breakeven inflation are directly related to market risk in high inflation environments and inversely during the periods of declining inflation or deflationary expectations. We use daily data series of percent changes in VIX as a proxy of market risk and changes in 5-year and 10-year breakeven inflation reflecting expectations of bond market participants. We employ Bayesian VAR, multiple breakpoint and Markov switching tests to examine the functional relationship between VIX and breakeven inflation for the January 3, 2003 – April 5, 2016 sample period. Our tests indicate a significant inverse relationship between VIX and, particularly, the 5-year breakeven inflation, which holds mainly during the recent financial crisis and the post-crisis periods.


Highlights: • Recent increases in market risk are associated with deflationary expectations • Significant negative relationship between 5Y &10Y BEI, and VIX prevails in 2008-2013 • 5Y BEI inflation expectations relate with market risk better than 10Y BEI • Partial regime switching between VIX and BEI occurs during turbulent markets

JEL Classification

C58, G13

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.



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