The effects of Federal funds rate surprises on S&amp;P 500 volatility and volatility risk premium

Gospodinov, Nikolay; Jamali, Ibrahim

doi:10.1016/j.jempfin.2012.04.009

Cited by 47 publications

(36 citation statements)

References 56 publications

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“…Regressions, similar to those used in Chulia, Martens and van Dijk, [30] and Gospodinov and Jamali [31], are employed. Regressing dummy variables on the first differences of liquidity is employed here to examine the effect of news on liquidity: …”

Section: Impact Of News Releasesmentioning

confidence: 99%

The Efficiency in Liquidity Measures during the US Monetary Announcements

Vortelinos¹,

Γκίλλας²,

Konstantatos³

et al. 2018

TEL

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We examine the impact of US economic news releases in the liquidity of eleven not so extensively researched emerging stock markets. We employ ten liquidity measures. The sample begins from June 2007 up to December 2016. Analysis is performed in a weekly frequency. China is the least liquid Asian market. Peru is the most liquid Latin American market. Most of the emerging markets are positively affected by the US news, offering diversification benefits to international investors. India and Argentina (China and Chile) are the Asian and Latin American countries with the highest (lowest) impacts, respectively. There is not a single best-in-class liquidity measure. The country with the lowest liquidity has the lowest impact from the US news releases. This result holds for both groups of countries in Asia and Latin America.

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Section: Impact Of News Releasesmentioning

confidence: 99%

The Efficiency in Liquidity Measures during the US Monetary Announcements

Vortelinos¹,

Γκίλλας²,

Konstantatos³

et al. 2018

TEL

View full text Add to dashboard Cite

show abstract

“…Choudhry (2010) investigated the daily data of the Dow Jones index from January 1939 to December 1945 and found that the majority of the wartime events labelled important by historians did result in structural breaks in both price movement and stock return volatility. Gospodinov and Jamali (2012) examined the effects of expected and surprise components in Federal funds target rate changes on realized and implied volatility of the S&P 500, and they found that surprise changes in the target rate significantly increased volatility. Kaeck and Alexander (2012) applied Markov chain Monte Carlo methods to the time series data on the S&P 500 index returns to estimate affine and non-affine stochastic volatility models where jumps were allowed; they concluded that the inclusion of jumps was less important than allowing for non-affine dynamics.…”

Section: Literature Reviewmentioning

confidence: 99%

Japanese Stock Markets and the US Stock Price Index Ratios

Tsuji

2014

AEF

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This paper investigates which US stock price index is strongly influenced by the Japanese stock markets. Our empirical tests as to the time-varying correlations derived from a multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) model reveal the following evidence. First, (1) we clarify that all US stock returns of the Dow Jones, S&P 500, and NASDAQ Composite indices are statistically significantly positively influenced by the returns of TOPIX and the Nikkei 225. Moreover, we also find that (2) the changes of the NASDAQ-S&P 500 (NS) ratio are statistically significantly positively influenced by the returns of TOPIX and the Nikkei 225 while the changes of the Dow Jones-S&P 500 (DS) ratio and the Dow Jones-NASDAQ (DN) ratio are statistically significantly negatively influenced by the returns of TOPIX and the Nikkei 225. These relations between the returns of TOPIX and the Nikkei 225 and the US stock price index ratios are clearly shown in all three sample periods employed in this paper. Hence our results suggest that, in our analyzing periods, (3) the NASDAQ index is most strongly positively connected with the Japanese stock markets.

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“…Vähämaa and Äijö (2011) further analyze the relation under different economic cycles and note that the relation between FOMC announcements and the VIX is stronger during expantionary periods. Gospodinov and Jamali (2012), using daily data, examine the relation between realized and implied volatility on the S&P 500 index and FOMC announcements and find that the surprise in these announcements has a positive effect on both realized and implied volatility.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Nikkinen and Sahlström, 2004) and particularly the announcement after the FOMC releases (see e.g. Chen and Clements, 2007;Vähämaa and Äijö, 2011;and Gospodinov and Jamali, 2012).…”

Section: Introductionmentioning

confidence: 99%

When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

2014

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This paper examines the impact of FOMC announcements on the intraday behavior of the VIX and VIX futures. We find that the VIX and the VIX futures start to decline immediately after the FOMC announcement, and this decline persists for about 45 minutes after the announcement. The VIX declines by about 3% on announcement days, whereas the nearest term VIX futures contract declines by about 1.40% around the announcement. We further note that the decline in the VIX and VIX futures is inversely related to the increase in realized volatility around the FOMC announcement. We show that on days with an FOMC announcement, a trading strategy, going short on the VIX futures at the start of the day and closing the position at the end of the same day, yields a return of about 10% p.a.

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The effects of Federal funds rate surprises on S&P 500 volatility and volatility risk premium

Cited by 47 publications

References 56 publications

The Efficiency in Liquidity Measures during the US Monetary Announcements

The Efficiency in Liquidity Measures during the US Monetary Announcements

Japanese Stock Markets and the US Stock Price Index Ratios

When No News is Good News The Decrease in Investor Fear after the FOMC Announcement

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