The Behavior of Investor's-fear-gauge-index on Scheduled Macroeconomic Communications

This paper examines the information content of scheduled macroeconomic communication on the newly constructed implied volatility index (India VIX). In this study we have considered RBI's (Reserve Bank of India) monetary policy statement and some other macroeconomic indicators as communication dummies. Empirical results show that scheduled communications have prominent effect on the implied volatility index that surround the report days. The impact of RBI policy statement on expected volatility surround one day report release found to be more responsive. In compliance with the literature, study shows that implied volatility rises before the scheduled communication and goes normal on the day of news release. In addition, news on GDP (gross domestic product) and WPI (wholesale/producers price index) has significant impact on VIX surround the report days. The implication of the study is in twofold: it is helpful in the volatility forecasting and options pricing.