Download this Paper Open PDF in Browser

News Implied Volatility and Disaster Concerns

63 Pages Posted: 21 Jan 2014 Last revised: 10 Jan 2017

Asaf Manela

Washington University in St. Louis - John M. Olin Business School

Alan Moreira

Yale University

Date Written: December 17, 2015


We construct a text-based measure of uncertainty starting in 1890 using front-page articles of the Wall Street Journal. News implied volatility (NVIX) peaks during stock market crashes, times of policy-related uncertainty, world wars and financial crises. In US post-war data, periods when NVIX is high are followed by periods of above average stock returns, even after controlling for contemporaneous and forward-looking measures of stock market volatility. News coverage related to wars and government policy explains most of the time variation in risk premia our measure identifies. Over the longer 1890-2009 sample that includes the Great Depression and two world wars, high NVIX predicts high future returns in normal times, and rises just before transitions into economic disasters. The evidence is consistent with recent theories emphasizing time variation in rare disaster risk as a source of aggregate asset prices fluctuations.

Keywords: Text-based analysis, implied volatility, rare disasters, equity premium, return predictability, machine learning

JEL Classification: G12, C82, E44

Suggested Citation

Manela, Asaf and Moreira, Alan, News Implied Volatility and Disaster Concerns (December 17, 2015). Journal of Financial Economics (JFE), Vol. 123, No. 1, 2017. Available at SSRN: or

Asaf Manela (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-9178 (Phone)


Alan Moreira

Yale University ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
2034320389 (Phone)


Paper statistics

Abstract Views