The Impacts of Macroeconomic News Announcements on Intraday Implied Volatility

76 Pages Posted: 10 Jan 2019

See all articles by Jieun Lee

Jieun Lee

The Bank of Korea; Bank of Korea - Economic Research Institute

Doojin Ryu

Sungkyunkwan University

Date Written: January 10, 2019

Abstract

This study examines the response of intraday options-implied volatilities to scheduled announcements of major macroeconomic indicators. By analyzing the KOSPI 200 options intraday data, we find that the abnormal implied volatility significantly increases around announcements of macroeconomic news and that the extent of the response is influenced by a variety of factors, including the type of macroeconomic indicators released, option type and economic conditions. Specifically, the increase in implied volatility around these announcements is more pronounced for puts than for calls. These effects are also more pronounced in the crisis and post-crisis periods than in the pre-crisis period. Monetary policy announcements have a more substantial impact on implied volatility than other announcements, even after controlling for news surprise components. Finally, the impact appears to be greater for policy rate hikes than for policy rate cuts.

Keywords: Event study; Intraday volatility; KOSPI 200 options; Macroeconomic news announcement

JEL Classification: E52, G10, G14

Suggested Citation

Lee, Jieun and Ryu, Doojin, The Impacts of Macroeconomic News Announcements on Intraday Implied Volatility (January 10, 2019). Bank of Korea WP 2019-2. Available at SSRN: https://ssrn.com/abstract=3313223 or http://dx.doi.org/10.2139/ssrn.3313223

Jieun Lee (Contact Author)

The Bank of Korea ( email )

110 3-Ga Namdaemunno Jung-Gu
Seoul 100-794, 100-794
Korea Republic of (South Korea)
82-2-759-5470 (Phone)

Bank of Korea - Economic Research Institute ( email )

110 3-Ga Namdaemunno Jung-Gu
Seoul 100-794
Korea Republic of (South Korea)

Doojin Ryu

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

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