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Intraday liquidity dynamics and news releases around price jumps: Evidence from the DJIA stocks

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Listed author(s):
  • Boudt, Kris
  • Petitjean, Mikael

Abstract

We study the dynamics of liquidity and news releases around jumps by identifying their intraday timing for the Dow Jones Industrial Average index constituents. Jumps are found to coincide with a significant increase in trading costs and demand for immediacy, amplified by the release of news. Liquidity supply remains nevertheless high and there is strong evidence of resilience. Liquidity shocks in the effective spread and the number of trades are the key drivers behind the occurrence of a jump. Order imbalance appears to be the most informative liquidity variable with respect to price discovery, especially after the arrival of news.

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File URL: http://www.sciencedirect.com/science/article/pii/S1386418113000177
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Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 17 (2014)
Issue (Month): C ()
Pages: 121-149

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Handle: RePEc:eee:finmar:v:17:y:2014:i:c:p:121-149
DOI: 10.1016/j.finmar.2013.05.004
Contact details of provider: Web page: http://www.elsevier.com/locate/finmar

Keywords: High-frequency data; Liquidity; News; Price jumps; Volatility;

Find related papers by JEL classification:

  • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
  • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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Cited by:

  1. Mazza, Paolo & Petitjean, Mikael, 2016. "On the usefulness of intraday price ranges to gauge liquidity in cap-based portfolios," Economic Modelling, Elsevier, vol. 54(C), pages 67-81.
  2. George Kapetanios & Michael Neumann & George Skiadopoulos, 2014. "Jumps in Option Prices and Their Determinants: Real-time Evidence from the E-mini S&P 500 Option Market," Working Papers 730, Queen Mary University of London, School of Economics and Finance.
  3. Tim Bollerslev & Jia Li & Yuan Xue, 2016. "Volume, Volatility and Public News Announcements," CREATES Research Papers 2016-19, Department of Economics and Business Economics, Aarhus University.
  4. Novotný, Jan & Petrov, Dmitri & Urga, Giovanni, 2015. "Trading price jump clusters in foreign exchange markets," Journal of Financial Markets, Elsevier, vol. 24(C), pages 66-92.
  5. Yao, Wenying & Tian, Jing, 2015. "The role of intra-day volatility pattern in jump detection: empirical evidence on how financial markets respond to macroeconomic news announcements," Working Papers 2015-05, University of Tasmania, Tasmanian School of Business and Economics.
  6. Dimitrios I. Vortelinos, 2015. "The Effect of Macro News on Volatility and Jumps," Annals of Economics and Finance, Society for AEF, vol. 16(2), pages 425-447, November.
  7. Dumitru, Ana-Maria & Urga, Giovanni, 2016. "Jumps and Information Asymmetry in the US Treasury Market," EconStor Preprints 130148, ZBW - German National Library of Economics.

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