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Jumps, cojumps and macro announcements

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  • LAHAYE, Jérôme
  • LAURENT, Sébastien
  • NEELY, Christopher J.

Abstract

We analyze and assess the impact of macroeconomic announcements on the discontinuities in many assets: stock index futures, bond futures, exchange rates, and gold. We use bi-power variation and the recently proposed non-parametric techniques of Lee and Mykland (2006) to extract jumps. Beyond characterizing the jump and cojump dynamics of many assets, we analyze how news arrival causes jumps and cojumps and estimate limited-dependent-variable models to quantify the impact of surprises. We confirm previous findings that some surprises create jumps. However, many announcements do not create jumps and many jumps are not related to announcements. The propensity of surprises to create jumps differs across asset classes, i.e., exchange rates, bonds, stock index. Payroll announcements are most important on stocks and bonds futures markets. Trade related news often creates cojumps on exchange rate markets.

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File URL: http://dx.doi.org/10.1002/jae.1149
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2413.

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Handle: RePEc:cor:louvrp:-2413

Note: In : Journal of Applied Econometrics, 26(6), 893-921, 2011
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  1. Neil Shephard & Ole E. Barndorff-Nielsen, 2002. "Estimating quadratic variation using realised variance," Economics Series Working Papers 2001-W20, University of Oxford, Department of Economics.
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