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Surprises in scheduled releases: why do they move the bond market?

  • Hess, Dieter E.
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    It is well known that information arrival has an impact on prices volatility, and trading volume in financial markets (see e.g., Goodhart and O?Hara 1997). Scheduled macroeconomic announcements, such as monthly employment figures, consumer prices, or building permits, stand out from the steady flow of information.1 Several studies (e.g. Fleming and Remolona 1997) show that these releases have a very distinct impact on prices. While most of these studies try to find out which releases are significant, considerably less effort has been devoted to the question what makes some releases so important in contrast to others that seem to attract no attention. Papers addressing this question emphasize the content of releases. For example, Edison (1996) discriminates between news related to unexpected inflation and those related to unexpected changes in economic activity. Investigating intraday T-bond futures price responses to surprises in scheduled macroeconomic releases, this paper presents evidence that the type of information is relevant. More specifically, the results suggest that the sequence of releases within a given content category helps to explain their relative importance. In other words, if market participants have already observed some figures on which they can base their assessment of a particular aspect of the economy, then the additional information of another related report should be small, and thus, its impact on prices.

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    File URL: http://econstor.eu/bitstream/10419/24409/1/dp0061.pdf
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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-61.

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    Date of creation: 2000
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    Handle: RePEc:zbw:zewdip:5344
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    1. repec:cup:cbooks:9780521471626 is not listed on IDEAS
    2. Gerald P. Dwyer, Jr. & R.W. Hafer, 1989. "Interest rates and economic announcements," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 34-46.
    3. Hali J. Edison, 1996. "The reaction of exchange rates and interest rates to news releases," International Finance Discussion Papers 570, Board of Governors of the Federal Reserve System (U.S.).
    4. Michael Schroder & Robert Dornau, 2002. "Do forecasters use monetary models? an empirical analysis of exchange rate expectations," Applied Financial Economics, Taylor & Francis Journals, vol. 12(8), pages 535-543.
    5. Hardouvelis, Gikas A., 1988. "Economic news, exchange rates and interest rates," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 23-35, March.
    6. Michael J. Fleming & Eli M. Remolona, 1997. "What moves the bond market?," Research Paper 9706, Federal Reserve Bank of New York.
    7. Ederington, Louis H & Lee, Jae Ha, 1993. " How Markets Process Information: News Releases and Volatility," Journal of Finance, American Finance Association, vol. 48(4), pages 1161-91, September.
    8. repec:cup:cbooks:9780521477444 is not listed on IDEAS
    9. Hemler, Michael L, 1990. " The Quality Delivery Option in Treasury Bond Futures Contracts," Journal of Finance, American Finance Association, vol. 45(5), pages 1565-86, December.
    10. repec:cup:cbooks:9780521477451 is not listed on IDEAS
    11. repec:cup:cbooks:9780521405515 is not listed on IDEAS
    12. Cox, John C. & Ingersoll, Jonathan Jr. & Ross, Stephen A., 1981. "The relation between forward prices and futures prices," Journal of Financial Economics, Elsevier, vol. 9(4), pages 321-346, December.
    13. Dwivedi, T. D. & Srivastava, V. K., 1978. "Optimality of least squares in the seemingly unrelated regression equation model," Journal of Econometrics, Elsevier, vol. 7(3), pages 391-395, April.
    14. Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
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