Can Information Be Locked-Up? Informed Trading Ahead of Macro-News Announcements
91 Pages Posted: 13 May 2014 Last revised: 27 Oct 2015
Date Written: October 13, 2015
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: Suggested Citation