The Impact of Scheduled Macroeconomic News Releases on Stock Market Uncertainty

Sammanfattning: While prior literature has studied the impact of news releases on different financial markets, the option market has received less attention. The purpose of this paper is to examine the relationship between scheduled macroeconomic news releases and stock market uncertainty in the United States between January 1990 and April 2021. This paper uses the option-based implied volatility of the S&P 500 Index, as measured by the Cboe Volatility Index (VIX), as a proxy for stock market uncertainty. This study also investigates the behavior of the VIX around each macroeconomic news release. In addition to using standard regression models, this paper applies a rigorous statistical framework to control for the multiple testing problem. The findings of this paper support previous literature on the impact of news releases on financial assets. The results show that scheduled macroeconomic news releases generally lead to a drop in the VIX as uncertainty regarding the impact of the news release is resolved. Concerning specific macroeconomic news releases, all, except the PPI report, lead to a significant decrease in market uncertainty upon announcement. The Employment Situation report leads to the largest decline in uncertainty, followed by statements from the FOMC meeting. In terms of the behavior of the VIX around the news releases, this paper finds that any significant changes in the VIX are relatively short-lived. In other words, the market is able to quickly incorporate the information content of the news releases. Furthermore, the results indicate no evidence of systematic information leaks prior to the news releases.