The Processing of Non-Anticipated Information in Financial Markets: Analyzing the Impact of Surprises in the Employment Report

Posted: 14 Jun 2005

See all articles by Dieter Hess

Dieter Hess

University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research

Abstract

This paper delineates the simultaneous impact of non-anticipated information on mean and variance of the intraday return process by including appropriate variables accounting for the news flow into both the mean and the variance function. This allows us to differentiate between the consistent price reaction to surprising news and traders' uncertainty about the precise price impact of this information. Focussing on the US employment report, we find that headline information is almost instantaneously incorporated into T-bond futures prices. Nevertheless, large surprises create considerable uncertainty, in particular 'bad' news. In contrast, if surprises in related headlines cross-validate each other, less room for differences of opinion is left, and hence volatility is decreased.

Keywords: Trading process, volatility, macroeconomic announcements, treasury bond futures, high-frequency data

JEL Classification: E44, G14

Suggested Citation

Hess, Dieter and Hautsch, Nikolaus, The Processing of Non-Anticipated Information in Financial Markets: Analyzing the Impact of Surprises in the Employment Report. Available at SSRN: https://ssrn.com/abstract=741584

Dieter Hess

University of Cologne - Department of Corporate Finance ( email )

Corporate Finance Seminar
Albertus-Magnus-Platz
D-50923 Cologne
Germany
+49 221 470 7876 (Phone)
+49 221 470 7466 (Fax)

HOME PAGE: http://cf.uni-koeln.de/

University of Cologne - Centre for Financial Research (CFR)

Germany

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Kolingasse 14
Vienna, A-1090
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
808
PlumX Metrics