Daily Archives: Jan 17, 2020 at 07:08 am EDT

Research Review | 17 January 2020 | Volatility

Macro News and Long-Run Volatility Expectations
Anders Vilhelmsson (Lund University)
December 10, 2019
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.
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Macro Briefing | 17 January 2020

Trump impeachment hearing begins in Senate: WSJ
Second death reported in new SARS-like virus in China: CNN
China’s GDP rose 6.1% in 2019, slowest gain since 1990: CNBC
Worrisome decline in UK retail sales continued in December: Bloomberg
US jobless claims continue to fall, indicating strong labor market: CNBC
US home builder confidence slips in January but remains bullish: CNBC
Trend growth in US import prices remained subdued in December: Reuters
Philly Fed Mfg Index rose sharply in January: Philly Fed
US retail spending accelerated in Dec to annual 5.8% increase — 1-1/2 year high: