Resolving Macroeconomic Uncertainty in Stock and Bond Markets

@inproceedings{Brandt2006ResolvingMU,
  title={Resolving Macroeconomic Uncertainty in Stock and Bond Markets},
  author={Alessandro Beber Michael W. Brandt},
  year={2006}
}
We establish an empirical link between the ex-ante uncertainty about macroeconomic fundamentals and the ex-post resolution of this uncertainty in financial markets. We measure macroeconomic uncertainty using prices of economic derivatives and relate this measure to changes in implied volatilities of stock and bond options when the economic data is released. Higher macroeconomic uncertainty is associated with greater reduction in implied volatilities following the news release. It is also… CONTINUE READING

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