S&amp;P 500 implied volatility and monetary policy announcements

Chen, En-Te; Clements, Adam

doi:10.1016/j.frl.2007.07.002

Cited by 96 publications

(63 citation statements)

References 11 publications

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“…Additionally, earlier findings in domestic markets (Nikkinen and Sahlstrom (2004), Chen and Clements (2007), Vahamaa and Aijo (2011) and Krieger et al (2012)) indicate that even scheduled monetary policy meetings move volatility. Furthermore, Lucca and Moench (2011) find that the return of the DAX equity index is 43 basis points higher on FOMC meeting days than on other days.…”

Section: Literature Review and Hypothesesmentioning

confidence: 89%

“…More related to our focus, recent literature has documented the relation between FOMC scheduled meetings and VIX changes. Nikkinen and Sahlstrom (2004), Chen and Clements (2007), Vahamaa and Aijo (2011) and Krieger et al (2012) find evidence of VIX declines following FOMC announcements. However, the focus and approach of the papers differ.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…VIX has been linked to "fear" Whaley (2009) and has been used to measure uncertainty in Nikkinen et al (2007) and Bialkowski et al (2008). Nikkinen and Sahlstrom (2004), Chen and Clements (2007), Vahamaa and Aijo (2011) and Krieger et al (2012) document VIX declines on FOMC (Federal Open Market Committee) meeting days in the U.S. market and conclude that FOMC meetings are generally uncertainty resolving, rather than uncertainty creating. However, the impact of other, non-U.S., central bank communications on volatility is unaddressed by the previous literature.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Comparing U.S. and European Market Volatility Responses to Interest Rate Policy Announcements

2014

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We examine the response of U.S. (VIX) and German (VDAX) implied volatility indices to the announcement of interest rate policy decisions by the Federal Open Market Committee (FOMC) and the European Central Bank (ECB). We confirm prior findings that VIX declines on FOMC meetings days. We present new findings that indicate that VDAX declines on FOMC meeting days, but is not related to ECB meeting days. VIX is unrelated to ECB meeting days. Taken collectively, our results indicate a prominent position for the FOMC in determining uncertainty levels both domestically and abroad relative to no relation between uncertainty levels and the ECB. JEL classification: G14, E44

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Section: Literature Review and Hypothesesmentioning

confidence: 89%

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Comparing U.S. and European Market Volatility Responses to Interest Rate Policy Announcements

2014

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“…The null hypothesis is that the lagged values of X have not a predicting power for Y; the alternative hypothesis is that there is a Granger-causality. 12 The Wald Test verify, through F-statistic, if some or all the lagged values of a variable are jointly equal to zero. linkages, by means of the Impulse Response Functions (IRF).…”

Section: Preliminary Analysis and Econometric Approachmentioning

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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“…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%

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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S&P 500 implied volatility and monetary policy announcements

Cited by 96 publications

References 11 publications

Comparing U.S. and European Market Volatility Responses to Interest Rate Policy Announcements

Comparing U.S. and European Market Volatility Responses to Interest Rate Policy Announcements

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

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

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