We provide evidence that the release of the unemployment rate announcement unconditionally leads to financial market uncertainty resolution in the stock, treasury, commodity, and foreign currency markets. The finding is economically valuable. A simple daily strategy of selling the 10-year Treasury Note Volatility Index futures before the unemployment rate announcement and closing the position after the announcement generates an annualized Sharpe ratio of 3.79, while a similar intraday strategy using VIX futures generates an annualized Sharpe ratio of 3.98. Although this resolution is not conditional of the value of the unemployment rate surprise, we also find that larger (lower) than expected unemployment can weaken (strengthen) the uncertainty resolution process.
Bibliographical noteFunding Information:
Chen Gu acknowledges the financial support from the Shanghai Pujiang Program (No. 19PJC077 ) and the National Natural Science Foundation of China (No. 91846108 , No. 71671012 ).
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- Asymmetric effect
- Financial market uncertainty
- Implied volatility
- Intraday data
- Unemployment news