A mean variance king? Creation and resolution of uncertainty under the employment report's reign
AbstractThis 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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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 01-60.
Date of creation: 2001
Date of revision:
Information processing; trading process; volatility; macroeconomic announcements; Treasury bond futures; high-frequency data;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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- Savaser, Tanseli, 2011.
"Exchange rate response to macronews: Through the lens of microstructure,"
Journal of International Financial Markets, Institutions and Money,
Elsevier, vol. 21(1), pages 107-126, February.
- Tanseli Savaser, 2007. "Exchange Rate Response to Macro News: Through the Lens of Microstructure," Department of Economics Working Papers 2007-02, Department of Economics, Williams College.
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