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The impact of macroeconomic announcements on implied volatility

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Author Info

  • Roland Fuss
  • Ferdinand Mager
  • Holger Wohlenberg
  • Lu Zhao
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    Abstract

    While many studies analyse the impact of scheduled macroeconomic announcements on equity market volatility, few focus on the impact on option implied volatilities. In this study, we examine the link between German and US macroeconomic events and the implied volatility indices DAX Volatility Index (VDAX) and Chicago Board Options Exchange, CBOE Volatility Index (VIX). We find that both indices fall on announcement days, with the strongest reactions occurring during the financial crisis from 2008 to 2009. Further, we identify a volatility spillover effect and significant covariance clustering between VDAX and VIX.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603107.2011.583216
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 21 (2011)
    Issue (Month): 21 ()
    Pages: 1571-1580

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    Handle: RePEc:taf:apfiec:v:21:y:2011:i:21:p:1571-1580

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    Related research

    Keywords: implied volatility; VIX and VDAX indices; bivariate VECH GARCH model; macroeconomic announcements;

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    Cited by:
    1. Imlak Shaikh & Puja Padhi, 2013. "RBI’s Monetary Policy and Macroeconomic Announcements: Impact on S&P CNX Nifty VIX," Transition Studies Review, Springer, vol. 19(4), pages 445-460, March.

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