Jumps and Information Asymmetry in the US Treasury Market

44 Pages Posted: 5 Apr 2016

See all articles by Ana-Maria H. Dumitru

Ana-Maria H. Dumitru

University of Surrey, School of Economics

Giovanni Urga

Cass Business School, Faculty of Finance, London, UK and Bergamo University, Italy

Date Written: April 4, 2016

Abstract

This paper analyses the informational role of the trading activity when jumps occur in the US Treasury market. As jumps mark the arrival of new information to the market, we explore the contribution of jumps in reducing the informational asymmetry. We identify jumps using a combination of jump detection techniques. For all maturities, the trading activity is more informative in the proximity of jumps. For the 2- and 5-year maturities, there is a lower level of information asymmetry before the jump, followed by a high level during the jump window and up to 20 minutes after the jump occurs. Thus, the incorporation of new information in prices is not instantaneous but several transactions are needed for the market to completely acknowledge the new information. Finally, we propose the use of the estimated integrated volatility as an exogenous predictor of jump occurrence in addition to announcement surprises.

Keywords: Jumps, Nonparametric Tests, High Frequency Data, US Treasury Market, Macroeconomic News, Information Asymmetry

JEL Classification: G12, G14, C01, C51

Suggested Citation

Dumitru, Ana-Maria H. and Urga, Giovanni, Jumps and Information Asymmetry in the US Treasury Market (April 4, 2016). Available at SSRN: https://ssrn.com/abstract=2759360 or http://dx.doi.org/10.2139/ssrn.2759360

Ana-Maria H. Dumitru (Contact Author)

University of Surrey, School of Economics ( email )

Guildford
Surrey GU2 7XH
United Kingdom

Giovanni Urga

Cass Business School, Faculty of Finance, London, UK and Bergamo University, Italy ( email )

108 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 8698 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/g.urga

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