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Analysis of the performance of volatility-based trading strategies on scheduled news announcement days: An international equity market perspective

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  • López, Raquel
  • Esparcia, Carlos

Abstract

This study explores the performance of volatility-based trading strategies on scheduled news announcement days. The design of the investment strategies is based on the fall of the VIX, VSTOXX, VDAX-NEW and VFTSE volatility indices on days with important macroeconomic releases, which we document over the period 2008–2018. Our trading strategies involve variance swaps, VIX futures, and VSTOXX mini futures contracts. The empirical evidence indicates that our trading strategies yield significantly positive mean returns on major announcement days. This finding suggests that variance swap and volatility futures markets are not efficient with respect to the release of macroeconomic information.

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  • López, Raquel & Esparcia, Carlos, 2021. "Analysis of the performance of volatility-based trading strategies on scheduled news announcement days: An international equity market perspective," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 32-54.
    • Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:32-54
    DOI: 10.1016/j.iref.2020.08.019
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    2. Adrian Fernandez‐Perez & Raquel López, 2023. "The effect of macroeconomic news announcements on the implied volatility of commodities: The role of survey releases," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(11), pages 1499-1530, November.

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    More about this item

    Keywords

    News announcements; Performance measures; Variance swap; Volatility index; Volatility futures;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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