Information Driven Price Jumps and Trading Strategy: Evidence from Stock Index Futures
47 Pages Posted: 15 Sep 2011
Date Written: September 15, 2011
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%.
Keywords: Macroeconomic News, Jumps, Index Futures, Trading Strategy
JEL Classification: G10, G14
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