Impact of the federal open market committee's meetings and scheduled macroeconomic news on stock market uncertainty

Nikkinen, Jussi; Sahlström, Petri

doi:10.1016/j.irfa.2004.01.001

Cited by 89 publications

(95 citation statements)

References 20 publications

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“…However, at the time of the announcement, we observe a marked decline in the VIX. This negative reaction is in line with the expectation of Ederington and Lee (1996), who document a decline in implied volatility of stock options and is in line with the empirical evidence in Nikkinen and Sahlström (2004), Chen and Clements (2007), and Vähämaa and Äijö (2011), who examine the impact of news announcement on the VIX at daily frequencies. What we observe in our data is that the decline in the VIX is not instantaneous, and that there is a post-FOMC announcement drift in the VIX.…”

supporting

confidence: 87%

“…Using daily data, Nikkinen and Sahlström (2004) examine the relation between the VXO (predecesor of the VIX based on the S&P100 index options) and several prescheduled announcements (the FOMC meeting, the employment report, the CPI and PPI figures). They find that while all announcements lead to a decrease in the volatility, this decrease is only significant in the case of the FOMC announcement and the employment report.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Indeed, several studies have documented a decrease in implied volatility (typically focusing on the VIX) after the announcement of prescheduled news (e.g. Nikkinen and Sahlström, 2004) and particularly the announcement after the FOMC releases (see e.g. Chen and Clements, 2007;Vähämaa and Äijö, 2011;and Gospodinov and Jamali, 2012).…”

Section: Introductionmentioning

confidence: 99%

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When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

2014

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This paper examines the impact of FOMC announcements on the intraday behavior of the VIX and VIX futures. We find that the VIX and the VIX futures start to decline immediately after the FOMC announcement, and this decline persists for about 45 minutes after the announcement. The VIX declines by about 3% on announcement days, whereas the nearest term VIX futures contract declines by about 1.40% around the announcement. We further note that the decline in the VIX and VIX futures is inversely related to the increase in realized volatility around the FOMC announcement. We show that on days with an FOMC announcement, a trading strategy, going short on the VIX futures at the start of the day and closing the position at the end of the same day, yields a return of about 10% p.a.

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supporting

confidence: 87%

Section: Literature Reviewmentioning

confidence: 99%

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When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

2014

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“…Due to the ambiguity linked to the informational content of the announcement, investors anticipate a higher volatility on the releasing or reporting day. Accordingly, it should be observed that the implied volatility gradually rise during the announcement period, reach high on before the day news disseminates, and comeback to its normal level afterwards [1]. Academics, market participants and market analysts are of great interest in the behaviour of implied volatility as it provides a superior forecast of future volatility.…”

Section: Introductionmentioning

confidence: 99%

Macroeconomic Information and the Implied Volatility: Evidence from India VIX

Srinivasan¹

2017

TEL

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The present study attempts to examine the scheduled macroeconomic announcement effects on the India VIX using OLS regression model and the EGARCH model. The empirical results show that the information content of macroeconomic news on report day and day after does not have significant influences on India VIX, except MCIR. Besides, the findings reveal no significant response of India VIX during one day before the scheduled news announcements. This is due to the fact that India VIX market is more uncertain before the declaration of the results of MCIR convention of RBI, Export, Import, Fiscal Deficit, GDP, IIP and Inflation (CPI/WPI). The study shows that investors do not need to consider the scheduled macroeconomic announcement except MCIR meeting day and one day after in the valuation of options pricing or financial planning.

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“…In fact, some previous studies (see e.g. [1] [2] [3] [4] and [5]) evidenced that the US economy have a significant influence on the worldwide economic trends, which keeps the operators' attention on the major US macro news.…”

Section: Introductionmentioning

confidence: 99%

The “Surprise Effect” of Macro Indicators on the Options Implied Volatilities Dynamics: A Test on the United States-Germany Relationship

Patanè¹,

Tedesco²,

Zedda³

2017

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This paper analyzes the "surprise effect" of some macroeconomic indicators on the US and Germany stock indexes options implied volatility, by means of a VAR model and IRFs between the two volatility indexes. Results show a significant influence of some specific macroeconomic "surprise effects" so that the US volatility has a positive influence on the German one, but not vice versa. With reference to the first considered period, January 2008-May 2012, characterized by higher volatility, the German market analysis shows a direct link between the "surprise effect" of the IFO Business Climate Index and the VDAX-NEW index changes. As regard the second time period (June 2012-December 2014), characterized by lower volatility, the significant macro "surprise effects" are related to the industrial sector (US Retail Sales, German Producer Price) and the job market (US Non-Farm Payroll). These results on the linkages between the macro "surprise effects" and the volatility indexes can be useful for implementing more effective short-term speculative and hedging strategies, based on the "surprise effect" direction and his link with the volatility index.

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Impact of the federal open market committee's meetings and scheduled macroeconomic news on stock market uncertainty

Cited by 89 publications

References 20 publications

When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

Macroeconomic Information and the Implied Volatility: Evidence from India VIX

The “Surprise Effect” of Macro Indicators on the Options Implied Volatilities Dynamics: A Test on the United States-Germany Relationship

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