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The impact of macroeconomic announcements in the Brazilian futures markets

Author

Listed:
  • Marcio Garcia

    (Department of Economics PUC-Rio)

  • Marcelo Medeiros

    (Department of Economics PUC-Rio)

  • Francisco Eduardo de Luna e Almeida Santos

    (Department of Economics PUC-Rio)

Abstract

The estimation of the impact of macroeconomic announcements in the Brazilian futuresmarkets is used to uncover the relationship between macroeconomic fundamentals andasset prices. Using intraday data from October 2008 to January 2011, we find thatexternal macroeconomic announcements dominate price changes in the ForeignExchange and Ibovespa futures markets, while the impact of the domestic ones ismainly restricted to Interest Rate futures contracts. We additionally propose aninvestment strategy based on the conditional price reaction of each market that showedpromising results in an out-of-sample study, where we are able to correctly identifyreturns’ signals, conditional on the surprise’s signal, in approximately 70% of the cases.Finally, we provide evidence that price reactions are conditional on the state of theeconomy and document the impact on volume and bid-ask spreads.

Suggested Citation

  • Marcio Garcia & Marcelo Medeiros & Francisco Eduardo de Luna e Almeida Santos, 2014. "The impact of macroeconomic announcements in the Brazilian futures markets," Textos para discussão 623, Department of Economics PUC-Rio (Brazil).
    • Handle: RePEc:rio:texdis:623
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