The Processing of Non-Anticipated Information in Financial Markets: Analyzing the Impact of Surprises in the Employment Report

Review of Finance

Volumn 6, Issue 2, 2002, Pages 133-161

  Hautsch, Nikolaus ^a   Hess, Dieter ^a  

^a UNIVERSITY OF KONSTANZ   (Germany)

Author keywords

High frequency data; Information processing; Macroeconomic announcements; Trading process; Treasury bond futures; Volatility

Indexed keywords

EID: 84961363389     PISSN: 15723097     EISSN: 1573692X     Source Type: Journal    
DOI: 10.1023/A:1020146630261     Document Type: Article

References (51)

1. Almeida, A., Goodhart, C. A. E., and Payne, R. (1998), 'The effects of macroeconomic news on high frequency exchange rate behavior', Journal of Financial and Quantitative Analysis 33, 383-408.
2. Andersen, T. G. and Bollerslev, T. (1997), 'Intraday periodicity and volatility persistence in financial markets', Journal of Empirical Finance 4, 115-158.
3. Andersen, T. G. and Bollerslev, T. (1998), 'Deutsche mark-dollar volatility: Intraday activity patterns, macroeconomic announcements and longer run dependencies', Journal of Finance 53, 219-265.
4. Balduzzi, P., Elton, E. J., and Green, C. (1997), 'Economic News and the Yield Curve: Evidence for the U.S. Treasury Market', Working Paper, New York University.
5. Becker, K. G., Finnerty, J. E., and Kopecky, K. J. (1996), 'Macroeconomic news and the efficiency of international bond futures markets', Journal of Futures Markets 16, 131-145.
6. Berkman, N. G. (1978), 'On the significance of weekly changes in Ml', New England Economic Review (May-June), 5-22.
7. Black, F. (1976), 'Studies in stock price volatility', in Proceedings of the 1976 Business Meeting of the Business and Economic Statistics Section, American Statistical Association, pp. 177-181.
8. Bollerslev, T., Cai, J., and Song, F. M. (2000), 'Intraday periodicity, long memory volatility, and macroeconomic announcement effects in the US Treasury bond market', Journal of Empirical Finance 7, 37-55.
9. Bollerslev, T. and Wooldridge, J. M. (1992), 'Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances', Econometric Review 11, 143-172.
10. Christie, A. A. (1982), 'The stochastic behavior of common stock variances-value, leverage, and interest rate effects', Journal of Financial Economics 10, 407-432.
11. Christie-David, R. and Chaudhry, M. (1999), 'Liquidity and maturity effects around news releases', Journal of Financial Research 22, 47-67.
12. Clark, P. K. (1973), 'A subordinated stochastic process model with finite variance for speculative prices', Econometrica 41, 135-155.
13. Cook, T. and Korn, S. (1991), 'The reaction of interest rates to the employment report: The role of policy anticipations', Economic Review, Federal Reserve Bank of Richmond 77, 3-12.
14. Copeland, T. E. (1976), 'A model of asset trading under the assumption of sequential information arrival', Journal of Finance 31, 1149-1168.
15. Copeland, T. E. (1987), 'The effect of sequential information arrival on asset prices: An experimental study', Journal of Finance 42, 763-797.
16. Crain, S. J. and Lee, J. H. (1995), 'Intraday volatility in interest rate and foreign exchange spot and futures markets', Journal of Futures Markets 15, 395-421.
17. Dacorogna,M.M., Müller, U. A., Nagler, R. J., Olsen, R. B., and Pictet,O. V. (1993), 'A geographical model for the daily and weekly seasonal volatility in the foreign exchange market', Journal of International Money and Finance 12, 413-443.
18. Dominguez, K. M. (1999), The Market Microstructure of Central Bank Intervention, NBERWorking Paper, W7337, Cambridge, MA.
19. Dwyer, G.-P. and Hafer, R.W. (1989), 'Interest rates and economic announcements', Federal Reserve Bank of St. Louis Review 71, 34-46.
20. Ederington, L. H. and Lee, J. H. (1993), 'How markets process information: News releases and volatility', Journal of Finance 48, 1161-1191.
21. Ederington, L. H. and Lee, J. H. (1995), 'The short-run dynamics of the price adjustment to new information', Journal of Financial and Quantitative Analysis 31, 117-134.
22. Edison, H. J. (1996), The Reaction of Exchange Rates and Interest Rates to News Releases, Board of Governors of the Federal Reserve System International Finance Discussion Papers, No. 570.
23. Fleming, M. J. and Remolona, E. M. (1997), 'What moves the bond market', Economic Policy Review, Federal Reserve Bank of New York, December, pp. 31-50.
24. Fleming, M. J. and Remolona, E. M. (1999a), 'Price formation and liquidity in the U.S. Treasury market: The response to public information', Journal of Finance 54, 1901-1915.
25. Fleming, M. J. and Remolona, E.M. (1999b), The Term Structure of Announcement Effects,Working Paper, Federal Reserve Bank of New York.
26. Franke, G. and Hess, D. (2000a), 'The impact of scheduled news announcements on T-bond and Bund futures trading', in H.-J. Vosgerau (ed.), Institutional Arrangements for Global Economic Integration, MacMillan, London, pp. 337-366.
27. Franke, G. and Hess, D. (2000b), 'Information diffusion in electronic and floor trading', Journal of Empirical Finance 7, 455-478.
28. French, K. R., Schwert, W., and Stambaugh, R. F. (1987), 'Expected stock returns and volatility', Journal of Financial Economics 19, 3-30.
29. Goodhart, C. A. E., Hall, S. G., Henry, S. G. B., and Pesaran, B. (1993), 'News effects in a highfrequency model of the sterling-dollar exchange rate', Journal of Applied Econometrics 8, 1-13.
30. Goodhart, C. A. E. and O'Hara, M. (1997), 'High frequency data in financial markets: Issues and applications', Journal of Empirical Finance 4, 73-114.
31. Hardouvelis, G. A. (1988), 'Economic news, exchange rates, and interest rates', Journal of International Money and Finance 7, 23-35.
32. Harris, L. (1987), 'Transaction data tests of the mixture of distributions hypothesis', Journal of Financial and Quantitative Analysis 22, 127-141.
33. Harris, M. and Raviv, A. (1993), 'Difference of opinion make a horse race', Review of Financial Studies 6, 473-506.
34. Harvey, C. R. and Huang, R. D. (1991), 'Volatility in the foreign currency futures market', Review of Financial Studies 4, 543-569.
35. Hess, D. (2001), Surprises in U.S. Macroeconomic Releases: Determinants of their Relative Impact on T-Bond Futures, Center of Finance and Econometrics Discussion Paper, No. 01/2001, University of Konstanz.
36. Hess, D. and Moersch, M. (2001), Predictability in Analysts' Forecast Errors: Does Discreteness Matter? Working Paper, University of Konstanz.
37. Jones, C. (1998), 'The economic sources of long memory in interest rate volatility', Proceedings. of the Second International Conference on High Frequency Data in Finance, Vol. 2, Olsen and Associates, Zürich.
38. Jones, C., Lamont, O., and Lumsdaine, R. (1998), 'Macroeconomic news and bond market volatility', Journal of Financial Economics 47, 315-337.
39. Kandel, E. and Pearson, N. D. (1995), 'Differential interpretation of public signals and trade in speculative markets', Journal of Political Economy 103, 831-872.
40. Karpoff, J. M. (1987), 'The relation between price changes and trading volume: A survey', Journal of Financial and Quantitative Analysis 22, 109-126.
41. Lamoureux, C. G. and Lastrapes, W. D. (1990), 'Heteroskedasticity in stock return data: Volume versus GARCH effects', Journal of Finance 45, 221-229.
42. Li, L. and Engle, R. F. (1998), Macroeconomic Announcements and Volatility of Treasury Futures, Department of Economics, University of California, San Diego Discussion Paper, No. 98-27.
43. Müller, U. A., Dacorogna, M. M., Davé, R. D., Olsen, R. B., Pictet, O. V., and von Weizsäcker, J. E. (1997), 'Volatilities of different time resolutions-Analyzing the dynamics of market components', Journal of Empirical Finance 4, 213-239.
44. Niemira, M. P. and Zukowski, G. F. (1998), Trading the Fundamentals: The Trader's Guide to Interpreting Economic Indicators and Monetary Policy, McGraw-Hill, New York.
45. Pagan, A. R. and Schwert, G.W. (1990), 'Alternative models for conditional stock volatility', Journal of Econometrics 45, 267-290.
46. Pindyck, R. S. (1984), 'Risk, inflation, and the stock market', American Economic Review 74, 334-351.
47. Prag, J. (1994), 'The response of interest rates to unemployment rate announcements: Is there a natural rate of unemployment', Journal of Macroeconomics 16, 171-184.
48. Rogers, R. M. (1998), Handbook of Key Economic Indicators, McGraw-Hill, New York.
49. Urich, T. and Wachtel, P. (1981), 'Market response to the weekly money supply announcements in the 1970s', Journal of Finance 36, 1063-1072.
50. Urich, T. and Wachtel, P. (1984), 'The effects of inflation and money supply announcements on interest rates', Journal of Finance 39, 1177-1188.
51. Varian, H. R. (1985), 'Divergence of opinion in complete markets', Journal of Finance 40, 309-317.