Macroeconomic Information and the Implied Volatility: Evidence from India VIX

Abstract

The present study attempts to examine the scheduled macroeconomic announcement effects on the India VIX using OLS regression model and the EGARCH model. The empirical results show that the information content of macroeconomic news on report day and day after does not have significant influences on India VIX, except MCIR. Besides, the findings reveal no significant response of India VIX during one day before the scheduled news announcements. This is due to the fact that India VIX market is more uncertain before the declaration of the results of MCIR convention of RBI, Export, Import, Fiscal Deficit, GDP, IIP and Inflation (CPI/WPI). The study shows that investors do not need to consider the scheduled macroeconomic announcement except MCIR meeting day and one day after in the valuation of options pricing or financial planning.

Indian Implied Volatility Index: A Macroeconomic Study

“…A study by Srinivasan (2017) attempted to understand the effect of scheduled macroeconomic announcement on Indian implied volatility by using EGARCH and OLS models. The study results found that the scheduled macroeconomic announcements and information content does not have any significant impact on Indian Implied volatility Heejoon Han, Ali M. Kutan, and Doojin Ryu (2015) examined the ability of macroeconomic and financial variables in forecasting the Korea's implied volatility index (VKOSPI) using augmented heterogenous autoregressive models (HAR) with exogenous variables.…”