Option volume and volatility response to scheduled economic news releases
✍ Scribed by John R. Nofsinger; Brian Prucyk
- Publisher
- John Wiley and Sons
- Year
- 2003
- Tongue
- English
- Weight
- 177 KB
- Volume
- 23
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
In this article, we examine the impact of 21 different types of scheduled macroeconomic news announcements on
S&P 100 stock‐index option volume and implied volatility. We find that there is a 2‐h delay
after the announcement before volume increases. However, there is an immediate increase in volatility, which
slowly dissipates over several hours. Further analysis shows that most of the high volume and volatility after
announcements come from the announcements that are considered bad news. That is, bad news creates high
volatility and high volume, whereas good news elicits lower volume and is not associated with higher volatility.
These results are not consistent with the predictions of any one model. We also find that the announcements that
cause the largest reaction in the equity option market are Consumer Credit, Consumer Spending, Factory
Inventories, NAPM, and Non‐Farm Payrolls. Six other announcements elicit a mild response. © 2003
Wiley Periodicals, Inc. Jrl Fut Mark 23:315–345, 2003