Jumps, Cojumps and Macro Announcements
Facultés Universitaires Notre-Dame de la Paix (FUNDP); University of Namur; Catholic University of Louvain
French National Center for Scientific Research (CNRS) - Research Group in Quantitative Saving (GREQAM)
Christopher J. Neely
Federal Reserve Bank of St. Louis - Research Division
August 24, 2009
AFFI/EUROFIDAI, Paris December 2008 Finance International Meeting AFFI - EUROFIDAI
We use recently proposed tests to extract jumps and cojumps from three types of assets: stock index futures, bond futures, and exchange rates. We then characterize the dynamics of these discontinuities and informally relate them to U.S. macroeconomic releases before using limited dependent variable models to formally model how news surprises explain (co)jumps. Nonfarm payroll and federal funds target announcements are the most important news across asset classes. Trade balance shocks are important for foreign exchange jumps. We relate the size, frequency and timing of jumps across asset classes to the likely sources of shocks and the relation of asset prices to fundamentals in the respective classes.
Number of Pages in PDF File: 34
Keywords: exchange rate, futures, bonds, realized volatility, bipower variation, jumps, macroeconomic announcement.
Date posted: October 13, 2008 ; Last revised: August 26, 2009