The role of news-based implied volatility among US financial markets

- News-based implied volatility is a new measure of uncertainty for capturing investors' perceptions.
- We investigate the impact of news-based implied volatility on long-term market volatilities from a GARCH-MIDAS model.
- News-based implied volatility performs well in predicting long-term market volatilities.
- The predictive power of news-based implied volatility is decreasing through a subsample analysis.

We investigate the role of uncertainty measured by news-based implied volatility in anticipating US long-term market volatilities from a GARCH-MIDAS model. We find that news-based implied volatility performs well in predicting long-term aggregate market volatilities. A subsample analysis provides that the predictive power of news-based implied volatility is decreasing.