The impact of macroeconomic announcements on implied volatility

Roland Fuss, Ferdinand Mager, Holger Wohlenberg and Lu Zhao

Applied Financial Economics, 2011, vol. 21, issue 21, 1571-1580

Abstract: While many studies analyse the impact of scheduled macroeconomic announcements on equity market volatility, few focus on the impact on option implied volatilities. In this study, we examine the link between German and US macroeconomic events and the implied volatility indices DAX Volatility Index (VDAX) and Chicago Board Options Exchange, CBOE Volatility Index (VIX). We find that both indices fall on announcement days, with the strongest reactions occurring during the financial crisis from 2008 to 2009. Further, we identify a volatility spillover effect and significant covariance clustering between VDAX and VIX.

Keywords: implied volatility; VIX and VDAX indices; bivariate VECH GARCH model; macroeconomic announcements (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/09603107.2011.583216

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