Trading Around Macroeconomic Announcements: Are All Traders Created Equal?

34 Pages Posted: 7 Apr 2005

See all articles by Grigori Erenburg

Grigori Erenburg

University of Western Ontario - King's University College

Alexander Kurov

West Virginia University - College of Business & Economics

Dennis Lasser

State University of New York (SUNY) at Binghamton - School of Management

Date Written: May 2005

Abstract

This paper examines the effects of macroeconomic announcements on equity index markets using high frequency transactions data for the regular and E-mini S&P 500 index futures contracts. For ten types of announcements that significantly affect prices, we analyze the price adjustment process and the trading patterns of exchange locals and off-exchange customers around the announcements. We find a large increase in trading activity immediately after the announcement. The results also show that during this initial surge in trading activity, locals are able to time their trades better than off-exchange traders even when locals do not have the advantage of access to the order flow. The trading strategy followed by exchange locals in the first 20 seconds after the announcement tends to be profitable, while off-exchange traders tend to make losing trades over the same time period. These results lend evidence that local traders tend to react to the macroeconomic information faster than off-exchange traders.

Keywords: Macroeconomic announcements, futures, trading, exchange locals

JEL Classification: G10, G14

Suggested Citation

Erenburg, Grigori and Kurov, Alexander and Lasser, Dennis, Trading Around Macroeconomic Announcements: Are All Traders Created Equal? (May 2005). Available at SSRN: https://ssrn.com/abstract=694801 or http://dx.doi.org/10.2139/ssrn.694801

Grigori Erenburg

University of Western Ontario - King's University College ( email )

266 Epworth Avenue
London, Ontario N6A 2M3
Canada

Alexander Kurov

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

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

Dennis Lasser (Contact Author)

State University of New York (SUNY) at Binghamton - School of Management ( email )

Vestal Parkway East
Binghamton, NY 13902-6015
United States
607-777-4874 (Phone)

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