TITLE:
The “Surprise Effect” of Macro Indicators on the Options Implied Volatilities Dynamics: A Test on the United States-Germany Relationship
AUTHORS:
Michele Patanè, Mattia Tedesco, Stefano Zedda
KEYWORDS:
Implied Volatility, Macro Surprise Effect, Markets Influences, VIX Index, VDAX-NEW Index
JOURNAL NAME:
Modern Economy,
Vol.8 No.4,
April
27,
2017
ABSTRACT: This
paper analyzes the “surprise effect” of some macroeconomic indicators on the US
and Germany stock indexes options implied volatility, by means of a VAR model
and IRFs between the two volatility indexes. Results show a significant
influence of some specific macroeconomic “surprise effects” so that the US
volatility has a positive influence on the German one, but not vice versa. With reference to the first considered period, January 2008-May 2012, characterized by
higher volatility, the German market analysis shows a direct link between the
“surprise effect” of the IFO Business Climate Index and the VDAX-NEW index
changes. As regard the second time period (June 2012-December 2014), characterized by lower volatility,
the significant macro “surprise effects” are related to the industrial sector
(US Retail Sales, German Producer Price) and the job market (US Non-Farm
Payroll). These results on the linkages between the macro “surprise effects”
and the volatility indexes can be useful for implementing more effective
short-term speculative and hedging strategies, based on the “surprise effect”
direction and his link with the volatility index.