The informational role of options markets: Evidence from FOMC announcements

The impacts of public news announcements on intraday implied volatility dynamics

“…This result is consistent with informed trading based on superior forecasting ability and a high capacity to reprocess or interpret publicly available data. We also find that implied volatility reacts most strongly before monetary policy announcements, which is consistent with Du, Fung, and Loveland () result that the volatility spread responds strongly before FOMC announcements, predicting the stock returns of banks and all firms. None of the coefficients on the other announcement dummies—EX_BASE, CPI, UE, IP, and BoT—is significant, indicating that when announcements are made during trading hours, the implied volatility on announcement days is not significantly different from that on nonannouncement days.…”

When do informed traders acquire and trade on informational advantage? Evidence from Federal Reserve stress tests

“…Our findings using a bank stress test setting are also consistent with theoretical work by Foster and Viswanathan (1990) that predicts the information advantage of informed traders is reduced through time by public information. Regardless of the timing (first vs. second signal) this evidence is also consistent with studies, such as Cao and Ou-Yang (2009), Hayunga and Lung (2014), and Du, Fung, and Loveland (2018), that suggest that option trading often clusters around events with high degrees of information asymmetry and/or disagreements among investors.…”

Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board

“…See Blinder et al (2008) for a review of the early literature. More recent examples include Jansen (2011a), Campbell et al (2012), Du et al (2018) and Seelajaroen et al (2019). These studies typically find that central bank announcements successfully move asset prices and financial market expectations in the desired direction.…”