Resolution of Financial Market Uncertainty Around the Release of Unemployment Rate Announcements

International Review of Economics and Finance, 80, 586-596.

30 Pages Posted: 18 Apr 2022 Last revised: 20 Aug 2023

See all articles by Chen Gu

Chen Gu

Shanghai Business School - Research Center of Finance

Denghui Chen

FDIC

Raluca Stan

University of Minnesota - Duluth

Date Written: January 6, 2022

Abstract

We provide evidence that the release of the unemployment rate announcement unconditionally leads to financial market uncertainty resolution in the stock, treasury, commodity, and foreign currency markets. The finding is economically valuable. A simple daily strategy of selling the 10-year Treasury Note Volatility Index futures before the unemployment rate announcement and closing the position after the announcement generates an annualized Sharpe ratio of 3.79, while a similar intraday strategy using VIX futures generates an annualized Sharpe ratio of 3.98. Although this resolution is not conditional of the value of the unemployment rate surprise, we also find that larger (lower) than expected unemployment can weaken (strengthen) the uncertainty resolution process.

Keywords: Unemployment News, Financial Market Uncertainty, Implied Volatility, Intraday Data, Asymmetric Effect

Suggested Citation

Gu, Chen and Chen, Denghui and Stan, Raluca, Resolution of Financial Market Uncertainty Around the Release of Unemployment Rate Announcements (January 6, 2022). International Review of Economics and Finance, 80, 586-596., Available at SSRN: https://ssrn.com/abstract=4060445 or http://dx.doi.org/10.2139/ssrn.4060445

Chen Gu

Shanghai Business School - Research Center of Finance ( email )

Shanghai
China

Denghui Chen

FDIC ( email )

550 17th Street NW
Washington, DC 20429

Raluca Stan (Contact Author)

University of Minnesota - Duluth ( email )

1049 University Drive
Duluth, MN 55812
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
79
Abstract Views
347
Rank
555,299
PlumX Metrics