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

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  • Hautsch, Nikolaus
  • Hess, Dieter E.

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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File URL: http://econstor.eu/bitstream/10419/24481/1/dp0160.pdf
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Bibliographic 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;

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Cited by:
  1. 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.

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