Something in the Air: Information Density, News Surprises, and Price Jumps

87 Pages Posted: 4 Sep 2015 Last revised: 27 Sep 2016

See all articles by Roland Füss

Roland Füss

University of St. Gallen - School of Finance

Markus Grabellus

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance, Accounting and Real Estate

Ferdinand Mager

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting

Michael Stein

University of Duisburg-Essen

Date Written: August 1, 2015

Abstract

This paper introduces a new information density indicator to provide a more comprehensive understanding of price reactions to news and, more specifically, to the sources of jumps in financial markets. Our information density indicator, which measures the abnormal amount of noisy “ticker” news before scheduled macroeconomic announcements, is significantly related to the likelihood of price jumps and independent of the magnitude of news surprises or pre-announcement trading activity. We therefore interpret this variable as a measure of additional uncertainty in the market, which is resolved by macroeconomic news as “hard” facts.

Keywords: Information density, jump identification, macroeconomic announcements, noisy information, price discovery process

JEL Classification: C58, F31, G12, G14, G15

Suggested Citation

Füss, Roland and Grabellus, Markus and Mager, Ferdinand and Stein, Michael, Something in the Air: Information Density, News Surprises, and Price Jumps (August 1, 2015). University of St. Gallen, School of Finance Research Paper No. 2015/17. Available at SSRN: https://ssrn.com/abstract=2655576 or http://dx.doi.org/10.2139/ssrn.2655576

Roland Füss (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Markus Grabellus

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance, Accounting and Real Estate ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

Ferdinand Mager

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Endowed Chair of Banking & Finance
Gustav-Stresemann-Ring 3
Wiesbaden, 65189
Germany

Michael Stein

University of Duisburg-Essen ( email )

Universitätsst. 12
Duisburg, 45117
Germany

HOME PAGE: http://www.fmoek.wiwi.uni-due.de/

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