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The impact of macroeconomic announcements on implied volatility

Roland Füss, Ferdinand Mager & 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.
   
type journal paper
   
keywords implied volatility, VIX and VDAX indices, bivariate VECH GARCH model, macroeconomic announcements
   
language English
kind of paper journal article
date of appearance 1-11-2011
journal Applied Financial Economics
publisher Routledge (Taylor&Francis) (New York)
ISSN 0960-3107
ISSN (online) 1466-4305
DOI 10.1080/09603107.2011.583216
volume of journal 21
number of issue 21
page(s) 1571-1580
review double-blind review
   
citation Füss, R., Mager, F., & Zhao, L. (2011). The impact of macroeconomic announcements on implied volatility. Applied Financial Economics, 21(21), 1571-1580, DOI:10.1080/09603107.2011.583216.