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U.S. and Japanese macroeconomic news and stock market volatility in Asia-Pacific

  • Vrugt, Evert B.

I use a new comprehensive dataset to analyze the impact of ten U.S. and six Japanese macroeconomic announcements on stock market volatility in Japan, Hong Kong, South-Korea and Australia. A GARCH model that allows for multiplicative announcement effects and asymmetries is employed. Overnight conditional variances are significantly higher on announcement days and significantly lower on days before and after announcements, especially for U.S. news. The impact of announcements on implied volatilities, in contrast, is much weaker. Out-of-sample trading strategies that systematically buy delta-neutral straddles on announcement days generate statistically significant profits, but these disappear after transaction costs are taken into account.

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File URL: http://www.sciencedirect.com/science/article/pii/S0927-538X(09)00024-9
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Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

Volume (Year): 17 (2009)
Issue (Month): 5 (November)
Pages: 611-627

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Handle: RePEc:eee:pacfin:v:17:y:2009:i:5:p:611-627
Contact details of provider: Web page: http://www.elsevier.com/locate/pacfin

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