Macro News and Long-Run Volatility Expectations

34 Pages Posted: 31 Dec 2019

See all articles by Anders Vilhelmsson

Anders Vilhelmsson

Lund University - Department of Economics

Date Written: December 10, 2019

Abstract

I propose a new model-free method for estimating long-run changes in expected volatility using VIX futures contracts. The method is applied to measure the effect on stock market volatility of scheduled macroeconomic news announcements. I find that looking at long-run changes gives qualitatively different results compared to previous studies that only look at realized variance and the VIX. I further find that FOMC announcements on average resolve uncertainty, but only during times when policy uncertainty is higher than average. Real side macro announcements increase long-run volatility during times of low policy uncertainty, but the effect is reversed during times of high policy uncertainty.

Keywords: implied volatility, macro announcements, news, volatility, fomc

JEL Classification: G12, G14, E44, C53

Suggested Citation

Vilhelmsson, Anders, Macro News and Long-Run Volatility Expectations (December 10, 2019). Available at SSRN: https://ssrn.com/abstract=3501456 or http://dx.doi.org/10.2139/ssrn.3501456

Anders Vilhelmsson (Contact Author)

Lund University - Department of Economics ( email )

Lund
Sweden

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