Information Driven Price Jumps and Trading Strategy: Evidence from Stock Index Futures

Abstract:     
This paper identifies intraday price jumps in equity index futures and examines the association between jump returns and macroeconomic announcements. We also evaluate the profitability of a high-frequency trading rule. Results indicate that about 48% to 56% of jump returns between 10:00-10:01 am can be attributed to the release of at least one 10:00 am announcement. About 70-80% of the top twenty jumps identified during the sample period at this time interval can be tagged with the 10:00 am releases. Finally, after accounting for transaction costs, returns from 1-minute holding positions aggregated over the 10-year sample period range between 16-29%.

Number of Pages in PDF File: 47

Keywords: Macroeconomic News, Jumps, Index Futures, Trading Strategy

JEL Classification: G10, G14

working papers series