Relevance of Uncertainty on the Volatility and Trading Volume in the US Treasury Bond Futures Market

26 Pages Posted: 4 Mar 2015

Date Written: March 2, 2015

Abstract

​This paper studies the impact of uncertainty on the investors' reactions to news on macroeconomic statistics. With daily data on realized volatility and trading volume, we show that the investors in the US Treasury bond futures market react significantly stronger to US macroeconomic news in times of low macroeconomic, financial and political uncertainty. We also find that investors are more sensitive to the uncertainty in the financial market compared to the macroeconomic and political uncertainties. Our results might partly explain the sudden freeze and low liquidity in some financial markets during the latest financial crisis.

Keywords: ambiguity, uncertainty, volatility, trading volume, bond market, macroeconomic announcements

JEL Classification: G12, G14, C22

Suggested Citation

Laakkonen, Helinä, Relevance of Uncertainty on the Volatility and Trading Volume in the US Treasury Bond Futures Market (March 2, 2015). Bank of Finland Research Discussion Paper No. 4/2015. Available at SSRN: https://ssrn.com/abstract=2572383 or http://dx.doi.org/10.2139/ssrn.2572383

Helinä Laakkonen (Contact Author)

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

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