IDEAS home Printed from https://ideas.repec.org/a/wly/jfutmk/v43y2023i11p1499-1530.html
   My bibliography  Save this article

The effect of macroeconomic news announcements on the implied volatility of commodities: The role of survey releases

Author

Listed:
  • Adrian Fernandez‐Perez
  • Raquel López

Abstract

We examine the response of the implied volatility in crude oil, gold, and silver commodity markets to macroeconomic news announcements. We find that macroeconomic releases reduce uncertainty in commodity markets consistent with the hypothesis of uncertainty resolution following scheduled news announcements, while macroeconomic releases from the category of survey news announcements increase it. This result can be explained by the qualitative nature of these surveys and their ability to provide information in advance of major official macroeconomic indicators. Nevertheless, we show that survey news announcements can also be useful in resolving commodity market uncertainty in periods of heightened global financial turmoil and when the manufacturing sector of the largest economies is in contraction.

Suggested Citation

  • 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.
    • Handle: RePEc:wly:jfutmk:v:43:y:2023:i:11:p:1499-1530
    DOI: 10.1002/fut.22444
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/fut.22444
    Download Restriction: no
    File URL: https://libkey.io/10.1002/fut.22444?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Smales, L.A., 2017. "Commodity market volatility in the presence of U.S. and Chinese macroeconomic news," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 15-27.
    2. Christiansen, Charlotte & Eriksen, Jonas Nygaard & Møller, Stig Vinther, 2014. "Forecasting US recessions: The role of sentiment," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 459-468.
    3. Hashmat Khan & Santosh Upadhayaya, 2020. "Does business confidence matter for investment?," Empirical Economics, Springer, vol. 59(4), pages 1633-1665, October.
    4. Hammoudeh, Shawkat & Nguyen, Duc Khuong & Sousa, Ricardo M., 2015. "US monetary policy and sectoral commodity prices," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 61-85.
    5. Lahiri, Kajal & Monokroussos, George, 2013. "Nowcasting US GDP: The role of ISM business surveys," International Journal of Forecasting, Elsevier, vol. 29(4), pages 644-658.
    6. Qadan, Mahmoud & Nama, Hazar, 2018. "Investor sentiment and the price of oil," Energy Economics, Elsevier, vol. 69(C), pages 42-58.
    7. Arabinda Basistha & Alexander Kurov, 2015. "The Impact of Monetary Policy Surprises on Energy Prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(1), pages 87-103, January.
    8. 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.
    9. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    10. Beber, Alessandro & Brandt, Michael W., 2006. "The effect of macroeconomic news on beliefs and preferences: Evidence from the options market," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1997-2039, November.
    11. Chaiyuth Padungsaksawasdi & Robert T. Daigler, 2014. "The Return‐Implied Volatility Relation for Commodity ETFs," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 34(3), pages 261-281, March.
    12. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2003. "Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange," American Economic Review, American Economic Association, vol. 93(1), pages 38-62, March.
    13. Nikkinen, Jussi & Rothovius, Timo, 2019. "The EIA WPSR release, OVX and crude oil internet interest," Energy, Elsevier, vol. 166(C), pages 131-141.
    14. Fernandez-Perez, Adrian & Frijns, Bart & Tourani-Rad, Alireza, 2017. "When no news is good news – The decrease in investor fear after the FOMC announcement," Journal of Empirical Finance, Elsevier, vol. 41(C), pages 187-199.
    15. Sami Vähämaa & Janne Äijö, 2011. "The Fed's policy decisions and implied volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(10), pages 995-1010, October.
    16. Marshall, Andrew & Musayev, Taleh & Pinto, Helena & Tang, Leilei, 2012. "Impact of news announcements on the foreign exchange implied volatility," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 719-737.
    17. Da Fonseca, José & Ignatieva, Katja, 2019. "Jump activity analysis for affine jump-diffusion models: Evidence from the commodity market," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 45-62.
    18. Peng Sun & Charles Sutcliffe, 2003. "Scheduled announcements and volatility patterns: The effects of monetary policy committee announcements on LIBOR and short sterling futures and options," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 23(8), pages 773-797, August.
    19. Awartani, Basel & Aktham, Maghyereh & Cherif, Guermat, 2016. "The connectedness between crude oil and financial markets: Evidence from implied volatility indices," Journal of Commodity Markets, Elsevier, vol. 4(1), pages 56-69.
    20. Roache, Shaun K. & Rossi, Marco, 2010. "The effects of economic news on commodity prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 377-385, August.
    21. Estrella, Arturo & Hardouvelis, Gikas A, 1991. "The Term Structure as a Predictor of Real Economic Activity," Journal of Finance, American Finance Association, vol. 46(2), pages 555-576, June.
    22. Sami Vähämaa & Sebastian Watzka & Janne Äijö, 2005. "What moves option‐implied bond market expectations?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 25(9), pages 817-843, September.
    23. Stephen M. Horan, Jeffrey H. Peterson, and James Mahar, 2004. "Implied Volatility of Oil Futures Options Surrounding OPEC Meetings," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 103-126.
    24. Jiang, George J. & Konstantinidi, Eirini & Skiadopoulos, George, 2012. "Volatility spillovers and the effect of news announcements," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2260-2273.
    25. John R. Nofsinger & Brian Prucyk, 2003. "Option volume and volatility response to scheduled economic news releases," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 23(4), pages 315-345, April.
    26. Michael Lemmon & Evgenia Portniaguina, 2006. "Consumer Confidence and Asset Prices: Some Empirical Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 19(4), pages 1499-1529.
    27. John Elder, Hong Miao, and Sanjay Ramchander, 2013. "Jumps in Oil Prices: The Role of Economic News," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    28. Dutta, Anupam & Bouri, Elie & Roubaud, David, 2019. "Nonlinear relationships amongst the implied volatilities of crude oil and precious metals," Resources Policy, Elsevier, vol. 61(C), pages 473-478.
    29. Paolo Pasquariello & Clara Vega, 2007. "Informed and Strategic Order Flow in the Bond Markets," The Review of Financial Studies, Society for Financial Studies, vol. 20(6), pages 1975-2019, November.
    30. Smales, Lee A. & Yang, Yi, 2015. "The importance of belief dispersion in the response of gold futures to macroeconomic announcements," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 292-302.
    31. Dutta, Anupam, 2018. "Oil and energy sector stock markets: An analysis of implied volatility indexes," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 61-68.
    32. Fassas, Athanasios P. & Siriopoulos, Costas, 2021. "Implied volatility indices – A review," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 303-329.
    33. Siriopoulos, Costas & Fassas, Athanasios, 2012. "An investor sentiment barometer — Greek Implied Volatility Index (GRIV)," Global Finance Journal, Elsevier, vol. 23(2), pages 77-93.
    34. Kajal Lahiri & George Monokroussos & Yongchen Zhao, 2016. "Forecasting Consumption: the Role of Consumer Confidence in Real Time with many Predictors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1254-1275, November.
    35. Dashan Huang & Fuwei Jiang & Jun Tu & Guofu Zhou, 2015. "Investor Sentiment Aligned: A Powerful Predictor of Stock Returns," The Review of Financial Studies, Society for Financial Studies, vol. 28(3), pages 791-837.
    36. Sibley, Steven E. & Wang, Yanchu & Xing, Yuhang & Zhang, Xiaoyan, 2016. "The information content of the sentiment index," Journal of Banking & Finance, Elsevier, vol. 62(C), pages 164-179.
    37. Elder, John & Miao, Hong & Ramchander, Sanjay, 2012. "Impact of macroeconomic news on metal futures," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 51-65.
    38. Nikkinen, Jussi & Sahlstrom, Petri, 2004. "Impact of the federal open market committee's meetings and scheduled macroeconomic news on stock market uncertainty," International Review of Financial Analysis, Elsevier, vol. 13(1), pages 1-12.
    39. Tsuchiya, Yoichi, 2014. "Purchasing and supply managers provide early clues on the direction of the US economy: An application of a new market-timing test," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 599-618.
    40. Roland Fuss & Ferdinand Mager & Holger Wohlenberg & Lu Zhao, 2011. "The impact of macroeconomic announcements on implied volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 21(21), pages 1571-1580.
    41. Patell, James M. & Wolfson, Mark A., 1979. "Anticipated information releases reflected in call option prices," Journal of Accounting and Economics, Elsevier, vol. 1(2), pages 117-140, August.
    42. Alessandro Beber & Michael W. Brandt, 2010. "When It Cannot Get Better or Worse: The Asymmetric Impact of Good and Bad News on Bond Returns in Expansions and Recessions," Review of Finance, European Finance Association, vol. 14(1), pages 119-155.
    43. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
    44. Olga Isengildina-Massa & Scott H. Irwin & Darrel L. Good & Jennifer K. Gomez, 2008. "Impact of WASDE reports on implied volatility in corn and soybean markets," Agribusiness, John Wiley & Sons, Ltd., vol. 24(4), pages 473-490.
    45. Tong Suk Kim & Jae Won Park & Yuen Jung Park, 2017. "Macroeconomic Conditions and Credit Default Swap Spread Changes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(8), pages 766-802, August.
    46. repec:bla:jfinan:v:59:y:2004:i:3:p:1201-1234 is not listed on IDEAS
    47. Michel A. Robe & Jonathan Wallen, 2016. "Fundamentals, Derivatives Market Information and Oil Price Volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(4), pages 317-344, April.
    48. Kim, Minho & Kim, Minchoul, 2003. "Implied volatility dynamics in the foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 511-528, August.
    49. Smales, L.A. & Apergis, N., 2017. "Does more complex language in FOMC decisions impact financial markets?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 171-189.
    50. Guha, Debashis & Hiris, Lorene, 2002. "The aggregate credit spread and the business cycle," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 219-227.
    51. Sami Vahamaa, 2009. "A note on the impact of scheduled macroeconomic news announcements on implied volatility," Applied Economics Letters, Taylor & Francis Journals, vol. 16(18), pages 1783-1789.
    52. Bilgin, Mehmet Huseyin & Gozgor, Giray & Lau, Chi Keung Marco & Sheng, Xin, 2018. "The effects of uncertainty measures on the price of gold," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 1-7.
    53. Michael Graham & Jussi Nikkinen & Petri Sahlström, 2003. "Relative importance of scheduled macroeconomic news for stock market investors," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 27(2), pages 153-165, June.
    54. Liu, Ming-Lei & Ji, Qiang & Fan, Ying, 2013. "How does oil market uncertainty interact with other markets? An empirical analysis of implied volatility index," Energy, Elsevier, vol. 55(C), pages 860-868.
    55. Jun Cai & Yan‐Leung Cheung & Michael C. S. Wong, 2001. "What moves the gold market?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(3), pages 257-278, March.
    56. Christie-David, Rohan & Chaudhry, Mukesh & Koch, Timothy W., 2000. "Do macroeconomics news releases affect gold and silver prices?," Journal of Economics and Business, Elsevier, vol. 52(5), pages 405-421.
    57. Brenner, Menachem & Pasquariello, Paolo & Subrahmanyam, Marti, 2009. "On the Volatility and Comovement of U.S. Financial Markets around Macroeconomic News Announcements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(6), pages 1265-1289, December.
    58. Ederington, Louis H. & Lee, Jae Ha, 1996. "The Creation and Resolution of Market Uncertainty: The Impact of Information Releases on Implied Volatility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(4), pages 513-539, December.
    59. Donders, Monique W. M. & Vorst, Ton C. F., 1996. "The impact of firm specific news on implied volatilities," Journal of Banking & Finance, Elsevier, vol. 20(9), pages 1447-1461, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. López, Raquel, 2018. "The behaviour of energy-related volatility indices around scheduled news announcements: Implications for variance swap investments," Energy Economics, Elsevier, vol. 72(C), pages 356-364.
    2. 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.
    3. Aharon, David Y. & Qadan, Mahmoud, 2018. "What drives the demand for information in the commodity market?," Resources Policy, Elsevier, vol. 59(C), pages 532-543.
    4. Kam F. Chan & Philip Gray, 2018. "Volatility jumps and macroeconomic news announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(8), pages 881-897, August.
    5. López, Raquel, 2015. "Do stylized facts of equity-based volatility indices apply to fixed-income volatility indices? Evidence from the US Treasury market," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 292-303.
    6. Sobti, Neharika & Sehgal, Sanjay & Ilango, Balakrishnan, 2021. "How do macroeconomic news surprises affect round-the-clock price discovery of gold?," International Review of Financial Analysis, Elsevier, vol. 78(C).
    7. Kam Fong Chan & Philip Gray, 2017. "Do Scheduled Macroeconomic Announcements Influence Energy Price Jumps?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(1), pages 71-89, January.
    8. Kiriu, Takuya & Hibiki, Norio, 2024. "The impact of macroeconomic announcements on risk, preference, and risk premium," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 842-857.
    9. Smales, L.A. & Lucey, B.M., 2019. "The influence of investor sentiment on the monetary policy announcement liquidity response in precious metal markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 60(C), pages 19-38.
    10. Tarek Chebbi, 2021. "The response of precious metal futures markets to unconventional monetary surprises in the presence of uncertainty," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1897-1916, April.
    11. Smales, L.A., 2017. "Commodity market volatility in the presence of U.S. and Chinese macroeconomic news," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 15-27.
    12. Jieun Lee & Doojin Ryu, 2019. "The impacts of public news announcements on intraday implied volatility dynamics," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(6), pages 656-685, June.
    13. Nikkinen, Jussi & Rothovius, Timo, 2019. "The EIA WPSR release, OVX and crude oil internet interest," Energy, Elsevier, vol. 166(C), pages 131-141.
    14. Smales, Lee A. & Yang, Yi, 2015. "The importance of belief dispersion in the response of gold futures to macroeconomic announcements," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 292-302.
    15. Ye, Wuyi & Guo, Ranran & Deschamps, Bruno & Jiang, Ying & Liu, Xiaoquan, 2021. "Macroeconomic forecasts and commodity futures volatility," Economic Modelling, Elsevier, vol. 94(C), pages 981-994.
    16. An N. Q. Cao & Michel A. Robe, 2022. "Market uncertainty and sentiment around USDA announcements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(2), pages 250-275, February.
    17. R. L�pez & E. Navarro, 2013. "Interest rate and stock return volatility indices for the Eurozone. Investors' gauges of fear during the recent financial crisis," Applied Financial Economics, Taylor & Francis Journals, vol. 23(18), pages 1419-1432, September.
    18. Semeyutin, Artur & Downing, Gareth, 2022. "Co-jumps in the U.S. interest rates and precious metals markets and their implications for investors," International Review of Financial Analysis, Elsevier, vol. 81(C).
    19. Rana, Hafiz Muhammad Usman & O'Connor, Fergal, 2023. "Domestic macroeconomic determinants of precious metals prices in developed and emerging economies: An international analysis of the long and short run," International Review of Financial Analysis, Elsevier, vol. 89(C).
    20. Finta, Marinela Adriana, 2021. "Japanese monetary policy and its impact on stock market implied volatility during pleasant and unpleasant weather," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jfutmk:v:43:y:2023:i:11:p:1499-1530. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/0270-7314/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.