The Impact of Macroeconomic Announcements on Implied Volatility

27 Pages Posted: 3 Nov 2010 Last revised: 22 Mar 2016

See all articles by Roland Füss

Roland Füss

University of St. Gallen - School of Finance

Ferdinand Mager

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting

Holger Wohlenberg

Deutsche Börse AG

Lu Zhao

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting

Date Written: May 4, 2011

Abstract

While many studies analyze 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 U.S. macroeconomic events and the implied volatility indices VDAX and 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.

Keywords: Implied volatility, VIX and VDAX indices, bivariate VECH GARCH model, macroeconomic announcements

JEL Classification: G10, G11, G14, G15

Suggested Citation

Füss, Roland and Mager, Ferdinand and Wohlenberg, Holger and Zhao, Lu, The Impact of Macroeconomic Announcements on Implied Volatility (May 4, 2011). Applied Financial Economics, Vol. 21, No. 21, 2011. Available at SSRN: https://ssrn.com/abstract=1701635 or http://dx.doi.org/10.2139/ssrn.1701635

Roland Füss

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Ferdinand Mager (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Endowed Chair of Banking & Finance
Gustav-Stresemann-Ring 3
Wiesbaden, 65189
Germany

Holger Wohlenberg

Deutsche Börse AG ( email )

Mergenthalerallee 61-71
Eschborn, 65760
Germany

Lu Zhao

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Campus Wiesbaden
Gustav-Stresemann-Ring 3
Wiesbaden, 65189
Germany

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