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Global Macroeconomic Announcements and Foreign Exchange Implied Volatility

Author

Listed:
  • Muhammad Ishfaq

    (School of Finance, Central University of Finance and Economics, Beijing, China,)

  • Zhang Bi Qiong

    (School of Finance, Central University of Finance and Economics, Beijing, China)

  • Syed Mehmood Raza Shah

    (School of Finance, Central University of Finance and Economics, Beijing, China.)

Abstract

This paper examines the impact of the US and Chinese macro economic announcements on foreign exchange implied volatilities of SPX, VXFXI, BPVIX, JYVIX, and EUVIX from 2011 to 2016. The study indicates that implied volatility becomes significant and leads to the resolution of uncertainty on the day of the announcement but some part of information make significant revisions in the expectations of future volatility. However, no significant evidence found that uncertainty increases following an actual announcement. The EUVIX found more sensitive to US macroeconomic announcements and JYVIX to Chinese macro economic announcements. Most announcements related to Chinese manufacturing, industrial output and investments are found to have a significant effect on global implied volatilities. This study will help global and local investors to consider relevant announcements impact during portfolio evaluation and also monetary thinkers to devise a mechanism to reduce volatility around announcements.

Suggested Citation

  • Muhammad Ishfaq & Zhang Bi Qiong & Syed Mehmood Raza Shah, 2017. "Global Macroeconomic Announcements and Foreign Exchange Implied Volatility," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 119-127.
    • Handle: RePEc:eco:journ1:2017-05-14
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    References listed on IDEAS

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    Cited by:

    1. Yu Wei & Lan Bai & Kun Yang & Guiwu Wei, 2021. "Are industry‐level indicators more helpful to forecast industrial stock volatility? Evidence from Chinese manufacturing purchasing managers index," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(1), pages 17-39, January.

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    More about this item

    Keywords

    Implied Volatility; Macroeconomic Announcements; Foreign Exchange;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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