Volatility jumps and macroeconomic news announcements
Year: 2018
Type: article
Abstract: While prior literature documents a link between macroeconomic news and price jumps, this paper demonstrates two channels through which economic announcements also manifest in volatility jumps. First, there is a strong coincidence of volatility jumps with scheduled announcements. Second, the mean jump size is an asymmetric function of the news surprise, with bad news resulting in larger jumps than good news. Furthermore, realized volatility (RV) and option‐implied volatility (IV) behave very differently over the days surrounding announcements. RV increases sharply on announcement days, while IV tends to decline consistent with the resolution of heightened uncertainty embedded in option prices.
Source: Journal of Futures Markets
DOI: 10.1002/fut.21922
Authors: Kam F. Chan, Philip Gray
Institutions: The University of Queensland, Monash University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2802718792