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Cojumping: Evidence from the US Treasury Bond and Future Markets (Discussion Paper 2010-06)

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Abstract

The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using a formal cojumping test this paper considers the cojumping behavior of spot and futures prices in high frequency US Treasury data. Cojumping occurs most frequently at shorter maturities and higher sampling frequencies. We find that the presence of an anticipated macroeconomic news announcement, and particularly non-farm payrolls, increases the probability of observing cojumps. However, a negative surprise in non-farm payrolls, also increases the probability of the cojumping tests being unable to determine whether jumps in spots and futures occur contemporaneously, or alternatively that one market follows the other. On these occasions the market does not clearly signal its short term pricing behavior.

Suggested Citation

  • Dungey, Mardi & Hvozdyk, Lyudmyla, 2010. "Cojumping: Evidence from the US Treasury Bond and Future Markets (Discussion Paper 2010-06)," Working Papers 10450, University of Tasmania, Tasmanian School of Business and Economics, revised 14 Jul 2010.
  • Handle: RePEc:tas:wpaper:10450
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    File URL: http://eprints.utas.edu.au/10450/1/DP2010-06_Dungey_Hvozdyk_July2010.pdf
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    References listed on IDEAS

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    1. Dungey, Mardi & Henry, Olan & McKenzie, Michael, 2010. "From Trade-to-Trade in US Treasuries," Working Papers 10446, University of Tasmania, Tasmanian School of Business and Economics, revised 01 May 2010.
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    Cited by:

    1. Yuta Koike, 2014. "An estimator for the cumulative co-volatility of asynchronously observed semimartingales with jumps," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 41(2), pages 460-481, June.

    More about this item

    Keywords

    US Treasury markets; high frequency data; cojump test;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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