Scheduled Macroeconomic News Announcements Research Articles

The jump dynamics of foreign exchange rates: how reliable and consistent are the results of widely utilized jump detection procedures

This paper investigates the jump dynamics of foreign exchange rates utilizing Barnsdorff-Nielsen and Shepherd (BNS) and Ait-Sahalia Jacob (AJ) jump detection procedures. The sample includes the nine major exchange rates of the world as well as two exchange rates from an emerging market (Turkey). The observation period is from January 1, 2010 to December 31, 2016. The number of jumps, number of jump days, average jump sizes and the ratio of negative (positive) jumps to total jumps of that observation period are estimated by BNS and AJ methods and the results are reported separately for five different sampled frequencies. The empirical results strongly suggest that jump dynamics of each exchange rate is quite unique and different from the others rather than displaying common patterns. A major result is the extreme sensitivity of the results to the chosen sampled frequencies which raises serious questions about the practical value of these tests for the investors. The paper by utilizing Event Study Analysis also shows that the foreign exchange rate jumps are related to scheduled macroeconomic news announcements.

Scheduled macroeconomic news announcements and intraday market sentiment

We analyze the effects of scheduled macroeconomic news on intraday and daily market sentiment by comparing sentiment on news announcement dates with that on non-announcement dates. Announcements of macroeconomic indicators change neither intraday nor daily market sentiment. However, the directions of the announced values have asymmetric effects on intraday market sentiment, although they do not affect daily market sentiment. For example, an announcement of an increase in the gross domestic product (GDP) reduces short-term intraday market sentiment, whereas an announcement of a decrease in GDP does not significantly affect intraday market sentiment. We also find that the effect of intraday market sentiment on short-term market returns is greater following announcements of macroeconomic indicators that significantly affect intraday market sentiment.

Macroeconomic news announcements and market efficiency: Evidence from the U.S. Treasury market

• This paper investigates the impact of scheduled macroeconomic news announcements on the U.S. Treasury market’s efficiency. • This paper employs a robust method to construct market inefficiency measures using intraday data and controlling for microstructure noise. • The U.S. Treasury market is less efficient in the five-minute interval before news arrival. • Investor heterogeneity provides a possible explanation for the decreased market efficiency before scheduled news announcements. We investigate the impact of scheduled macroeconomic news announcements on the U.S. Treasury market’s efficiency. Using intraday data and controlling for microstructure noise, we employ a robust method to construct market inefficiency measures. We find that the U.S. Treasury market is less efficient in the five-minute interval before news arrival. Our findings are robust for different sample periods, macroeconomic news announcements, and market inefficiency measures. We find that investor heterogeneity provides a possible explanation for the decreased market efficiency before scheduled news announcements.

Scheduled macroeconomic news announcements and Forex volatility forecasting

AbstractIn the world of finance, the volatility of asset prices plays a crucial role, for example, in portfolio optimization or the valuation of derivatives. Macroeconomic news announcements are among the most important factors that influence volatility in financial markets. This paper focuses on the effect of scheduled macroeconomic news announcements on the realized volatility of the most traded currency pairs, EUR/USD, GBP/USD, and USD/JPY, from 2009 to 2017. Realized volatility is analysed on a daily basis, and it is also decomposed into continuous and jump components that are analysed separately. We focus on out‐of‐sample forecasting and provide strong evidence that scheduled macroeconomic news announcements play a statistically significant role in volatility models. Forecasting accuracy is improved by up to 12.4%. These results are important for future practical applications in various areas of finance.

Impact of macroeconomic news, regulation and hacking exchange markets on the volatility of bitcoin

We study whether news and sentiment about bitcoin regulation, the hacking of bitcoin exchanges and scheduled macroeconomic news announcements affect the volatility of bitcoin, measured as realized variance and its jump component. Our results show that realized variance and its jump component exhibit similar dynamics and react similarly to various types of news. Volatility of bitcoin reacts most strongly to news on bitcoin regulation, positive investor sentiment regarding bitcoin regulation extracted using Google searches, and most notably, hacking attacks on cryptocurrency exchanges. Quantile regression reveals that hacking attacks have particularly strong impact on the upper conditional distribution of bitcoin volatility. We also find that the volatility of bitcoin is not influenced by most scheduled US macroeconomic news announcements, such as government budget deficits, inflation, or even monetary policy announcements. On the other hand, bitcoin responds with increased volatility to announcements of forward-looking indicators, such as the consumer confidence index.

The relationship between European Brent crude oil price development and US macroeconomy

Abnormal volatility has a damaging effect on the macroeconomy and is seen as a measure of risk in asset and commodity markets. This investigation had the aim to analyze the supposed transatlantic volatility inducing effect of the most prominent scheduled macroeconomic news announcements from the United States (US) on Brent Blend crude oil price intraday volatility over a period of seven years from 2012 to 2018. The objective was to generate a ranking list of scheduled US macroeconomic news that forecast high intraday volatility episodes at precise points in time. A total of 38 US news was analyzed using a data mining workflow. Data modeling was conducted using a simple ordinary least squares regression model and performed with programming language Python. A one hour window of rolling standard deviation based on one minute high-frequency closing prices were applied. As a result, 20 scheduled US macroeconomic news was successfully identified to significantly impact Brent crude oil price volatility. The model strongly supports the forecast of high price fluctuations and provides an opportunity for market players to adjust their risk management strategies right in time.

Macro News and Long-Run Volatility Expectations

I propose a new model-free method for estimating long-run changes in expected volatility using VIX futures contracts. The method is applied to measure the effect on stock market volatility of scheduled macroeconomic news announcements. I find that looking at long-run changes gives qualitatively different results compared to previous studies that only look at realized variance and the VIX. I further find that FOMC announcements on average resolve uncertainty, but only during times when policy uncertainty is higher than average. Real side macro announcements increase long-run volatility during times of low policy uncertainty, but the effect is reversed during times of high policy uncertainty.

Impact of Macroeconomic Announcements on Foreign Exchange Volatility: Evidence from South Africa

AbstractThis study focuses on scheduled macroeconomic news announcements and evaluates their impact on the volatility of the South African rand (ZAR) and US dollar (USD) exchange rate using high frequency data. The following asymmetries are studied: news items by geographical location, no‐news vs. surprise news announcements and positive vs. negative news announcements. We make the following findings in our empirical study: (i) After the release of a news announcement, the level of foreign exchange volatility rises. This is independent of whether the news item surprised the market or not. (ii) Both South African and US news items significantly impact USD/ZAR volatility, suggesting that the news items are being used to formulate investor expectations regarding the future prospects of the currency pair. (iii) Negative news appears to have a greater impact on exchange rate volatility relative to positive news. This result is also state dependent, as investors tend to behave differently to news depending on the economic climate at that point in time. Investor cognitive biases give rise to the asymmetric news effects on exchange rate volatility. Finally, investors do not always act in rational manner, especially when faced with multiple news items that are contradictory to each other.

Do stylized facts of equity-based volatility indices apply to fixed-income volatility indices? Evidence from the US Treasury market

In this paper, we examine whether widely documented properties of equity-based volatility indices apply to US Treasury bond volatility indices (TBVIXs). We calculate TBVIXs in a model-free way using the market prices of five-, ten- and 30-year Treasury futures options over a sample of more than 20years. The empirical findings of this study reveal that changes in TBVIXs are positively correlated with changes in both Treasury yield rates and US non-fixed income and European equity-based volatility indices. Our analysis also shows that changes in Treasury yield rates Granger cause changes in TBVIXs and that past changes in TBVIXs help explain current changes in equity-based volatility indices (and vice versa). Finally, we find that TBVIXs fall following scheduled macroeconomic news announcements and that the response of TBVIXs to news releases depends to some extent on the magnitude and sign of the surprise in the announcement. This study's findings have implications for volatility risk management using the recently listed futures on the Chicago Board of Options Exchange's ten-year Treasury note volatility index.

Effects of Macroeconomic News Announcements on Risk-neutral Distribution: Evidence from KOSPI200 Intraday Options Data*

This study examines the effects of scheduled macroeconomic news announcements on the implied risk-neutral distribution (RND) from option prices. Using the KOSPI200 index options market as the sample market, this study investigates whether the implied RND responds to scheduled macroeconomic news announcements from South Korea and the US. We select six important macroeconomic news announcements each for South Korea and the US and classify them as good news and bad news according to the KOSPI200 index return on the day of the announcement. We use two parametric methods to recover the RND and conduct regression analyses at daily, hourly, and 5-min intervals. The analysis provided several noteworthy results. First, the RND responds to most of the macroeconomic news announcements, but its response disappears within a day in many cases. Second, the longevity of the response depends on the type of news. Third, the implied volatility tends to increase, and the RND tends to become less leptokurtic after news announcements. Fourth, the RND tends to become less (more) negatively skewed after a good (bad) news announcement. Finally, there is no clear evidence of the information contents regarding the effect of news announcements in the RND.

A note on the impact of scheduled macroeconomic news announcements on implied volatility

This note demonstrates that different methodological approaches may lead to somewhat different conclusions about the impact of scheduled macroeconomic news announcements on implied volatility. While there is no doubt that implied volatilities are significantly affected by macroeconomic releases, the analysis presented in this note shows that different approaches provide inconsistent results regarding the direction of the effect and also about the relative importance of different types of macroeconomic announcements.

Asset Returns and Scheduled Macroeconomic News Announcements

Stock market excess returns are significantly higher on days when the government is scheduled to announce inflation statistics, unemployment statistics, and interest rate decisions. The average announcement day excess return from 1958 to 2007 is 10.6 basis points versus 1.4 basis points for all the other days. In contrast, the risk-free rate (measured as the daily return on a 30-day T-bill) is detectably lower on announcement days, consistent with a precautionary saving motive. We show that a simple equilibrium model with deterministically varying aggregate risk can generate higher risk premia and lower risk-free rates around announcements. Our results demonstrate the required trade-off between macroeconomic risk and financial asset returns.

Risk, jumps, and diversification

We test for price discontinuities, or jumps, in a panel of high-frequency intraday stock returns and an equiweighted index constructed from the same stocks. Using a new test for common jumps that explicitly utilizes the cross-covariance structure in the returns to identify non-diversifiable jumps, we find strong evidence for many modest-sized, yet highly significant, cojumps that simply pass through standard jump detection statistics when applied on a stock-by-stock basis. Our results are further corroborated by a striking within-day pattern in the significant cojumps, with a sharp peak at the time of regularly scheduled macroeconomic news announcements. r 2008 Published by Elsevier B.V.

Macroeconomic News Announcements and Corporate Bond Credit Spreads

We investigate the impact of scheduled macroeconomic news announcements on the corporate bond market using daily credit spreads from January 1997 through June 2003. We find that macroeconomic announcements mainly affect high-yield bonds. In particular, the announcement surprises in leading economic indicators and employment reports have significant impact on credit spreads of high-yield bonds. We also find that the conditional volatility of credit spreads on high-yield bonds increases on announcement days for the advance monthly retail sales. Finally, we find that the VIX volatility index, not macroeconomic announcements, has significant impact on jumps in daily credit spreads.

Option volume and volatility response to scheduled economic news releases

AbstractIn this article, we examine the impact of 21 different types of scheduled macroeconomic news announcements on S&P 100 stock‐index option volume and implied volatility. We find that there is a 2‐h delay after the announcement before volume increases. However, there is an immediate increase in volatility, which slowly dissipates over several hours. Further analysis shows that most of the high volume and volatility after announcements come from the announcements that are considered bad news. That is, bad news creates high volatility and high volume, whereas good news elicits lower volume and is not associated with higher volatility. These results are not consistent with the predictions of any one model. We also find that the announcements that cause the largest reaction in the equity option market are Consumer Credit, Consumer Spending, Factory Inventories, NAPM, and Non‐Farm Payrolls. Six other announcements elicit a mild response. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:315–345, 2003

Option Volume and Volatility Response to Scheduled Economic News Releases: Evidence of Informed Trading

In this paper, we examine the impact of scheduled macroeconomic news announcements on both OEX index options and individual equity option volume. We do this in order to study the way in which investors use these options in their portfolios. We find that announcements are associated with an increase in OEX option volume but not in the volume of individual equity options. Consumer Confidence and New Home Sales elicit the highest trading response. Our primary findings are evidence of informed trading in the OEX option market before the announcement as well as significant evidence of hedging activity. These findings indicate that investors use index options to increase the leverage of their portfolios when they have private information and to protect themselves against adverse information when they do not.

How Markets Process Information: News Releases and Volatility

ABSTRACTWe examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets. We find these announcements are responsible for most of the observed time‐of‐day and day‐of‐the‐week volatility patterns in these markets. While the bulk of the price adjustment to a major announcement occurs within the first minute, volatility remains substantially higher than normal for roughly fifteen minutes and slightly elevated for several hours. Nonetheless, these subsequent price adjustments are basically independent of the first minute's return. We identify those announcements with the greatest impact on these markets.