Macro news and long-run volatility expectations

Anders Vilhelmsson
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Anders Vilhelmsson: Knut Wicksell Centre for Financial Studies, Lund University, Postal: Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7080, S-220 07 Lund, Sweden
Authors registered in the RePEc Author Service: Anders Wilhelmsson

No 2020/1, Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies

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: marco (search for similar items in EconPapers)
JEL-codes: E60 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2020-01-20
New Economics Papers: this item is included in nep-mac
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