Publication Type

Journal Article

Version

submittedVersion

Publication Date

6-2021

Abstract

We investigate the effect of Japan's Monetary Policy Meeting releases on the intraday dynamics of the Nikkei Stock Average Volatility Index and its futures during pleasant and unpleasant weather. We show that at the time of a monetary policy release when the temperature is pleasant, there is a significant decline in Japanese equities' implied volatility and futures, which lasts for about 10 min and 5 min, respectively. This decline is longer and exhibits a greater variation when releases occur during cold days. Finally, we emphasize the achievable economic profits and losses, given the reaction of Nikkei VI futures to the Japanese monetary policy releases during pleasant and unpleasant weather days, respectively. In particular, taking a short position at the start of the trading day on pleasant days and closing this position at the end of the trading day generates an average annual return of 5.6%.

Keywords

Nikkei 225 VI, Nikkei 225 VI futures, MPM release, Intraday data, Intraday, Unpleasant weather

Discipline

Asian Studies | Finance | Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Finance

Publication

Pacific-Basic Finance Journal

Volume

67

First Page

1

Last Page

17

ISSN

0927-538X

Identifier

10.1016/j.pacfin.2021.101562

Publisher

Elsevier

Embargo Period

3-17-2022

Copyright Owner and License

Authors / SKBI

Additional URL

https://doi.org/10.1016/j.pacfin.2021.101562

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