Abstract
This study examines the effects of scheduled macroeconomic news announcements on the implied risk-neutral distribution (RND) from option prices. Using the KOSPI200 index options market as the sample market, this study investigates whether the implied RND responds to scheduled macroeconomic news announcements from South Korea and the US. We select six important macroeconomic news announcements each for South Korea and the US and classify them as good news and bad news according to the KOSPI200 index return on the day of the announcement. We use two parametric methods to recover the RND and conduct regression analyses at daily, hourly, and 5-min intervals. The analysis provided several noteworthy results. First, the RND responds to most of the macroeconomic news announcements, but its response disappears within a day in many cases. Second, the longevity of the response depends on the type of news. Third, the implied volatility tends to increase, and the RND tends to become less leptokurtic after news announcements. Fourth, the RND tends to become less (more) negatively skewed after a good (bad) news announcement. Finally, there is no clear evidence of the information contents regarding the effect of news announcements in the RND.
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