Jumps and Trading Activity in Interest Rate Futures Markets: The Response to Macroeconomic Announcements

44 Pages Posted: 23 Mar 2010 Last revised: 29 Nov 2010

See all articles by C. Johan Bjursell

C. Johan Bjursell

Barclays Capital

George H. K. Wang

George Mason University - Department of Finance

Robert I. Webb

University of Virginia - McIntire School of Commerce

Date Written: March 10, 2010

Abstract

We apply nonparametric statistical procedures to extract jumps around scheduled macroeconomic news in U.S. Treasury bond, U.S. Treasury note and Eurodollar futures prices from 2001 to 2004. Volatility and trading activity during announcement days with jumps versus no jumps are also analyzed with computerized trade reconstruction (CTR) and time and sales high frequency data. Several interesting results are obtained. First, while jumps often occur during announcement periods, many jumps cannot be associated with macroeconomic news releases. Second, volatility and trading volume are higher during announcement days with jumps than announcement days without jumps. Furthermore, volatility returns to the pre-announcement level faster following scheduled news releases with jumps than after announcements without jumps. Third, we find that price and trading volume are adjusting simultaneously in the first one-minute interval following the announcement. Thus our results do not confirm that there exists a twostage adjustment process for prices and trading volume in interest rate futures following scheduled public news releases.

Keywords: realized variation, bipower variation, jump statistics, interest rate futures, macro announcements, price and trading volume patterns

JEL Classification: C32, G13

Suggested Citation

Bjursell, C. Johan and Wang, George H. K. and Webb, Robert I., Jumps and Trading Activity in Interest Rate Futures Markets: The Response to Macroeconomic Announcements (March 10, 2010). Available at SSRN: https://ssrn.com/abstract=1570824 or http://dx.doi.org/10.2139/ssrn.1570824

C. Johan Bjursell

Barclays Capital ( email )

Tokyo
Japan

George H. K. Wang (Contact Author)

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

Robert I. Webb

University of Virginia - McIntire School of Commerce ( email )

Rouss and Robertson Halls 125 Ruppel Lane
Charlottesville, VA 22903
United States
(434) 924-7570 (Phone)

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