Can Information Be Locked-Up? Informed Trading Ahead of Macro-News Announcements

91 Pages Posted: 13 May 2014 Last revised: 27 Oct 2015

See all articles by Gennaro (帅纳) Bernile

Gennaro (帅纳) Bernile

University of Miami - Department of Finance

Jianfeng Hu

Singapore Management University - Lee Kong Chian School of Business

Yuehua Tang

University of Florida - Department of Finance

Date Written: October 13, 2015

Abstract

Government agencies routinely allow pre-release access to information to accredited news agencies under embargo agreements. Using high frequency data, we find evidence consistent with informed trading during embargoes of the Federal Open Market Committee’s scheduled announcements. The E-mini S&P 500 futures’ abnormal order imbalances are in the direction of subsequent policy surprises and contain information that predicts the market reaction to the policy announcements. The estimated informed trades’ profits are arguably large. Notably, we find no evidence of informed trading prior to the start of FOMC news embargoes or during lockups ahead of nonfarm payroll, PPI, and GDP data releases.

Keywords: Media Lockup, News Embargo, Informed Trading, FOMC Announcement, Macroeconomic News

JEL Classification: E59, G14, G18, K29

Suggested Citation

Bernile, Gennaro (帅纳) and Hu, Jianfeng and Tang, Yuehua, Can Information Be Locked-Up? Informed Trading Ahead of Macro-News Announcements (October 13, 2015). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2436272 or http://dx.doi.org/10.2139/ssrn.2436272

Gennaro (帅纳) Bernile (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Jianfeng Hu

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore
(+65) 68085477 (Phone)

Yuehua Tang

University of Florida - Department of Finance ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/yuehuatang

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