Abstract
We empirically examine the effects of the disagreement on macroeconomic conditions among economists in options markets (indices) at the country level. We find positive and significant relations between the disagreement on macro fundamentals (e.g., GDP growth, CPI, and the unemployment rate) and at-the-money implied volatility, the volatility risk premium, the out-of-the-money (OTM) volatility skew, and option open interest. Our findings have important implications: the macroeconomic disagreement among forecasters varies over time, which means that investors could obtain an expected return by generating a time-varying risk premium in the index options trading market.
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