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A mean variance king? : Creation and resolution of uncertainty under the employment report's reign

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Author Info
Hautsch, Nikolaus
Hess, Dieter E.

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Abstract

This paper delineates the simultaneous impact of non-anticipated information on first and second moments of the intraday price process by including appropriate variables accounting for the news flow into both the mean and the variance function. This allows us to differentiate between the consistent price reaction to surprising news and traders’ uncertainty about the precise price impact of this information. Analyzing the US employment report, we find that headline information is almost instantaneously incorporated into T-bond futures prices. Nevertheless, large surprises create considerable uncertainty, in particular ’bad’ news. In contrast, if surprises in related headlines cross-validate each other, less room for differences of opinion is left, and hence volatility is decreased.

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 01-60.

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Date of creation: 2001
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Handle: RePEc:zbw:zewdip:5416

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Related research
Keywords: Information processing trading process volatility macroeconomic announcements Treasury bond futures high-frequency data

Find related papers by JEL classification:
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

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