The Relationship Between NVIDIA Stock Price Changes and Nasdaq-100 Market Volatility During the AI Boom: Evidence from 2023–2025
DOI:
https://doi.org/10.61173/fe11262Keywords:
NVIDIA, Nasdaq-100, artificial intelligence, daily returns, volatilityAbstract
The rapid growth of generative artificial intelligence made NVIDIA one of the most closely watched companies in the U.S. stock market. This paper studies the relationship between NVIDIA’s daily price changes and Nasdaq-100 market volatility during 2023–2025. Daily log returns were calculated from 752 matched closing-price observations, leaving 751 return observations. Absolute daily return is treated as an observable proxy for short-term volatility rather than as the market’s unobservable conditional variance. The analysis combines descriptive statistics, correlation, a contemporaneous regression, and a fixed-parameter one-day-ahead forecast test. Inference uses Newey–West heteroskedasticity-and-autocorrelation-consistent (HAC) standard errors with five lags. NVIDIA and Nasdaq-100 absolute returns had a correlation of 0.583. In the same-day regression, a one-percentage-point increase in NVIDIA absolute return was associated with a 0.237-percentage-point increase in Nasdaq-100 absolute return (HAC SE = 0.044; 95% CI = [0.150, 0.323]). The forecasting evidence was weak: adding previous-day NVIDIA volatility reduced 2025 MAE by 0.4% but increased RMSE by 0.4%. HAC loss-differential tests did not reject equal predictive accuracy under absolute loss (p=0.342) or squared loss (p=0.300). The results therefore support a strong same-day association, not a causal effect or a reliable one-day-ahead forecasting advantage.
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