Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange

Andersen, Torben G.; Vega, Clara; Bollerslev, Tim; Diebold, Francis X.

doi:10.2139/ssrn.312158

Cited by 242 publications

(266 citation statements)

References 44 publications

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“…So far I have not distinguished between cases when the data release matches expectations and cases when there is a surprise, or “news” event. Prior studies by Kuttner (), Andersen et al (), and Evans and Lyons () find that asset prices react to surprises in macroeconomic releases. Almeida, Goodhart, and Payne () suggest that market efficiency dictates that the expected portion of an announcement should have no impact on asset prices.…”

Section: Importance Of Market Expectations and Newsmentioning

confidence: 96%

“…Market efficiency would suggest that the expected portion of an announcement should have no effect on asset prices, and recent studies (Anderson et al ; Evans and Lyons ) implicitly incorporate this assumption by focusing solely on the surprise component of macroeconomic announcements. Kuttner () and Fatum and Scholnick () find that asset returns and volatilities respond primarily to the surprise component—measured by the difference between the actual announced figure and the expected figure taken as the median of survey data—in macroeconomic data announcements.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Macroeconomic Announcements on Interest Rate Futures: High‐frequency Evidence From Australia

Smales

2013

J of Financial Research

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I investigate the behavior of Australian interest rate futures around the release of major scheduled macroeconomic announcements. The adjustment to new information occurs quickly with the majority of the reaction complete within 30 seconds. The period immediately before the announcement exhibits high volatility, low levels of volume, and wide bid-ask spreads. In the 30 seconds following the scheduled announcement there is a sharp increase in price volatility, significant positive correlation in returns, high levels of trading activity, and large adjusted returns. The reaction is stronger in shorter maturity contracts, and in the period surrounding the 2007-2008 financial crisis.JEL Classification: G10, G14, G15 I am very grateful to my referee, Christopher J. Neely, for his insightful feedback during the review process. I gratefully appreciate the comments from the associate editor, Louis H. Ederington, which improved the scope and conciseness of the article. I also thank seminar participants at the University of New South Wales and the 2012 Financial Markets and Corporate Governance conference for useful comments and suggestions. All remaining errors are mine.

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Section: Importance Of Market Expectations and Newsmentioning

confidence: 96%

Section: Introductionmentioning

confidence: 99%

Impact of Macroeconomic Announcements on Interest Rate Futures: High‐frequency Evidence From Australia

Smales

2013

J of Financial Research

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“…A related literature documents sizable conditional responses of various asset classes to macroeconomic news announcements (Fleming and Remolona () and Andersen et al. ()). More closely related to our paper, Jones, Lamont, and Lumsdaine () study unconditional fixed income returns around macroeconomic releases (inflation and labor market), and Savor and Wilson () find positive excess equity returns on days of inflation, labor market, and FOMC releases from 1958 to 2009.…”

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confidence: 99%

The Pre‐FOMC Announcement Drift

Lucca

Moench

2015

The Journal of Finance

467

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractSince the Federal Open Market Committee (FOMC) began announcing its policy decisions in 1994, U.S. stock returns have on average been more than thirty times larger on announcement days than on other days. Surprisingly, these abnormal returns are accrued before the policy announcement. The excess returns earned during the twentyfour hours prior to scheduled FOMC announcements account for more than 80 percent of the equity premium over the past seventeen years. Similar results are found for major global equity indexes, but not for other asset classes or other economic news announcements. We explore a few risk-based explanations of these findings, none of which can account for the return anomaly.

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“…22See, for example, Lobo (2000, 2002), Flannery and Protopapadakis (2002), Andersen, Bollerslev, Diebold, and Vega (2003), Boyd, Hu, and Jagannathan (2005), and Lobo, Darrat, and Ramschander (2006).…”

mentioning

confidence: 99%

The effect of monetary policy shocks on stock prices accounting for endogeneity and omitted variable biases

Farka

2008

Rev Financ Econ

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A new high frequency data set is used to estimate the impact of the Fed on the level and volatility of stock prices while accounting for endogeneity and omitted variable biases and potential asymmetries. Results show that after addressing these issues, the effect of policy shocks on the level and volatility of stock returns is higher than previously reported. GARCH findings indicate that the volatility impact is tent-shaped, spiking during policy announcements and declining before and after the release. The level and conditional volatility of stock returns is found to respond asymmetrically to the type of policy shocks (timing versus future path of monetary policy) and the type of policy action (easing versus tightening).

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Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange

Cited by 242 publications

References 44 publications

Impact of Macroeconomic Announcements on Interest Rate Futures: High‐frequency Evidence From Australia

Impact of Macroeconomic Announcements on Interest Rate Futures: High‐frequency Evidence From Australia

The Pre‐FOMC Announcement Drift

The effect of monetary policy shocks on stock prices accounting for endogeneity and omitted variable biases

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