Drift Begone! Release Policies and Preannouncement Informed Trading

32 Pages Posted: 1 Jan 2020

See all articles by Alexander Kurov

Alexander Kurov

West Virginia University - College of Business & Economics

Alessio Sancetta

University of London, Royal Holloway College - Department of Economics

Marketa Wolfe

Skidmore College - Department of Economics

Date Written: December 12, 2019

Abstract

In 2017 the UK Statistics Authority discontinued the early access of government officials to market-sensitive macroeconomic data. We examine the effect of this policy change on price adjustment in the foreign exchange futures market around major U.K. macroeconomic announcements. Three macroeconomic announcements (consumer price index, industrial production, and retail sales) show strong evidence of informed trading before their public releases until 2017. This preannouncement price drift weakens with the end of the prerelease access. Analogously, the market reaction to the announcements at the official release time has become stronger.

Keywords: Macroeconomic news announcements, foreign exchange market, release policies, preannouncement effect, drift, informed trading

JEL Classification: G14, E44, F31, D82

Suggested Citation

Kurov, Alexander and Sancetta, Alessio and Wolfe, Marketa, Drift Begone! Release Policies and Preannouncement Informed Trading (December 12, 2019). Available at SSRN: https://ssrn.com/abstract=3502748 or http://dx.doi.org/10.2139/ssrn.3502748

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

Alessio Sancetta

University of London, Royal Holloway College - Department of Economics ( email )

Royal Holloway College
Egham
Surrey, Surrey TW20 0EX
United Kingdom

Marketa Wolfe

Skidmore College - Department of Economics ( email )

815 N Broadway
Saratoga Springs, NY 12866
United States
+1-518-580-8374 (Phone)

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