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The impact of macroeconomic announcements on implied volatility

Author

Listed:
  • Roland Fuss
  • Ferdinand Mager
  • Holger Wohlenberg
  • Lu Zhao

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.

Suggested Citation

  • Roland Fuss & Ferdinand Mager & Holger Wohlenberg & Lu Zhao, 2011. "The impact of macroeconomic announcements on implied volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 21(21), pages 1571-1580.
  • Handle: RePEc:taf:apfiec:v:21:y:2011:i:21:p:1571-1580
    DOI: 10.1080/09603107.2011.583216
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    Cited by:

    1. repec:eco:journ1:2017-05-14 is not listed on IDEAS
    2. Imlak Shaikh & Puja Padhi, 2013. "RBI’s Monetary Policy and Macroeconomic Announcements: Impact on S&P CNX Nifty VIX," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(4), pages 445-460, March.
    3. Onan, Mustafa & Salih, Aslihan & Yasar, Burze, 2014. "Impact of macroeconomic announcements on implied volatility slope of SPX options and VIX," Finance Research Letters, Elsevier, vol. 11(4), pages 454-462.

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