the financial characteristics of firms and theories of merger activity there are a number of important reasons why economists have shown great interest in the analysis of merger activity in all advanced industrial societies the first is that merger activity has been a major cause of rising concentration in the case of the u k a comparison of five estimates made by different researchers led the authors of a 1978 government green paper 4 to the view that since the late 1950s mergers accounted for half of the growth in concentration the rise in concentration in turn creates concern because of the possible misallocation of resources the possible abuse of market power and the political and social impact of concentrated economic strengh in giant firms a second reason is that because mergers have been major instruments of growth by firms and often involve large scale financial outlays there is interest in the extent to which mergers have brought gains or losses to the firms involved including their shareholders there is a third reason which is connected more narrowly with the development of theories of the firm the unending debate between theories based on various kinds of maximising behaviour profit maximising growth maximising etc and as between maximising under constraints and forms of satisficing has led to attempts to formulate stable hypotheses drawn from such theories such hypotheses often involve the role of mergers in for example managerial utility functions principally directed at growth the role of the stock market as a market in control which can discipline firms to conform to profit maximising norms etc these three reasons for interest in merger analysis are clearly inter related and all create interest in the determinants of merger activity in looking at such determinants it is useful for analytical purposes to make some distinction between those approaches which focus on the relation between firms and their macro environment and those which concern themselves primarily with the characteristics of firms such as the degree of managerial shareholder control with assumptions as to the different expected behaviour or on such features as the presence of excess liquidity or high

heterogeneous information arrivals and return volatility dynamics uncovering the long run in high frequency returns recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean reverting fractionally integrated process meanwhile much shorter lived volatility dynamics are typically observed with high frequency intradaily returns the present article demonstrates that by interpreting the volatility as a mixture of numerous heterogeneous short run information arrivals the observed volatility process may exhibit long run dependence as such the long memory characteristics constitute an intrinsic feature of the return generating process rather than the manifestation of occasional structural shifts these ideas are confirmed by our analysis of a one year time series of fiveminute deutschemark u s dollar exchange rates among the most puzzling issues is the behavior of volatility while the general properties of volatility remain elusive perhaps the most intriguing feature revealed by empirical work on volatility is its long persistence such behavior has sparked a search almost akin to that for the holy grail for the perfect garch model but the underlying question of why such volatility persistence endures remains unanswered we conjecture that the ability to analyze higher frequency data may be particularly useful in pursuing this issue goodhart and o hara 1997 the pronounced volatility clustering is arguably one of the most striking features of financial price series recorded at daily or weekly intervals and a large body of literature seeking to characterize this aspect of speculative returns has emerged over the past decade 1 at the same time convincing theoretical explanations for the underlying sources of long run persistence in volatility remain elusive the recent advent of comprehensive high frequency andersen is from the j l kellogg graduate school of management of northwestern university bollerslev is from the university of virginia and is a research associate at the national bureau of economic research we gratefully acknowledge the financial support provided by a research grant from the institute for quantitative research in finance the q group special thanks are due to olsen and associates for making the intradaily exchange rate quotes and reuter s news tape available we have received valuable comments from wake epps clive w j granger stephen f gray j huston mcculloch as well as seminar participants at the december 1996 triangle econometrics workshop the 1997 afa meetings in new orleans academia sinica the wharton school usc and georgetown and york universities we remain fully responsible for the content 1 see bollerslev chou and kroner 1992 for a survey of this literature using arch type

market specific news and its impact on forward premia on electricity markets abstract this paper studies the impact of market specific news on the short term forward premia on the nordic electricity market i show that the short term premia between the day ahead and intra day electricity prices on the nordic market can be partly explained by the arrival of news specific to the power market by exploring the types of news i show that production failures are most important in shaping premia production disruptions in coal powered units are most frequent and have the greatest effect on the differences between the day ahead and intra day prices

jumps cojumps and macro announcements we use recently proposed tests to extract jumps and cojumps from three types of assets stock index futures bond futures and exchange rates we then characterize the dynamics of these discontinuities and informally relate them to us macroeconomic releases before using limited dependent variable models to formally model how news surprises explain co jumps nonfarm payroll and federal funds target announcements are the most important news across asset classes trade balance shocks are important for foreign exchange jumps we relate the size frequency and timing of jumps across asset classes to the likely sources of shocks and the relation of asset prices to fundamentals in the respective classes

the fed and the stock market an identification based on intraday futures data this article develops a new identification procedure to estimate the contemporaneous relation between monetary policy and the stock market within a vector autoregression var framework the approach combines high frequency data from the futures market with the var methodology to circumvent exclusion restrictions and achieve identification our analysis casts doubt on var models imposing a recursive structure between innovations in policy rates and stock returns we find that a tightening in policy rates has a negative impact on stock prices and that the federal reserve fed has responded significantly to movements in the stock market estimates are robust to various model specifications

does liberalization reduce agency costs evidence from the indian banking sector abstract on february 16 2002 the reserve bank of india issued a circular that signaled a policy liberalization facilitating acquisition of private sector banks in india by foreign entities portfolios of private sector and nationalized banks posted significant value gains in the days surrounding the announcement the gains by private sector banks were almost double those of nationalized banks we further analyze the firm specific abnormal returns using cross sectional regressions and find a significant relation between firm specific abnormal returns and factors typically associated with a bank s potential for takeover these results provide the first empirical support for stulz s hypothesis that one cause of the valuation gains associated with liberalization is the expected gain from a reduction of agency costs

informativeness of trade size in foreign exchange markets this article investigates a trading strategy that relies on private information in an electronic spot foreign exchange market in a structural microstructure model extended for high frequency data our analysis links the informational content of trading activity to order size we find that large currency orders are likely to be placed by informed traders during increased price volatility episodes in addition the data suggest that excess kurtosis in exchange rate returns corresponding to large price contingent trades is significantly lower than that in small trades

information technology and time based competition in financial markets this paper studies time based competition in imperfect securities markets linking it investment decisions information processing delays and trading strategies at the it investment stage traders trade off the cost of it against their anticipated trading profits at the trading stage each trader devises a trading strategy based on his new information while taking into account the impact of both his own trades and those of other traders in the market our results illustrate how traders react to market imperfections due to trading costs and information processing delays and how superior traders convert a timeliness advantage into higher trading profits they also shed light on the relationship between the price adjustment process and traders information processing delays timeliness imposes an interesting structure on trader competition traders with longer information processing delays trade less frequently submit smaller orders and enjoy lower profits per trade our analysis of traders it investment decisions demonstrates how factors such as it costs number of traders and the frequency and nature of new information affect the level of it investments we further illustrate how improved it infrastructure translates into competitive advantage

discount rate changes stock market returns volatility and trading volume evidence from intraday data and implications for market efficiency we examine the eaect of discount rate changes on stock market returns volatility and trading volume using intraday data equity returns generally respond negatively and significantly to the unexpected announcements however the eaect of expected changes on equity returns is insignificant furthermore our results indicate that equity prices respond to announcements within the trading period hour after the information release an indication of a return reversal is too small to cover the full transaction costs unexpected discount rate changes also contribute to higher market volatility although the volatility is short lived similarly unexpected changes in discount rates induce larger trading volume while expected changes do not abnormal trading volume occurs only in period t our results also support the notion that unexpected changes in the discount rates impact market returns irrespective of the federal reserve operating procedures 1999 elsevier science b v all rights reserved

the impact of the u s employment report on exchange rates abstract the impact of the u s employment report and analyst forecasts of that report s major statistics on pound dollar yen dollar and euro dollar exchange rates are explored while the nonfarm payroll employment figure has the greatest impact we find that the exchange rates also react to the announced revision to last month s payroll figure and to the unemployment rate in all three markets the exchange rate response to the payroll employment figure is strongly conditioned on pre release analyst uncertainty the median analyst forecast from bloomberg anticipates over 80 of the monthly variation in the payroll figure and is basically unbiased the markets appear to respond to these analyst forecasts prior to the government release analyst forecast dispersion tends to increase following large forecast errors indicating that when the announced figure is far from what analysts expected they tend to disagree on the implications for future payroll levels

the effects of inflation news on high frequency stock returns previous research using daily returns finds conflicting evidence about the relationship between unanticipated inflation news and stock returns we explore the relationship by looking at the response in minutes and trades of size based stock portfolios to unexpected changes in the regularly scheduled producer price index and consumer price index announcements in particular we answer the following three questions 1 do stocks respond to inflation news 2 what is the speed and path of that response 3 is the response stable or does it vary with the economy the direction of the news or time

market efficiency and the u s market for sulfur dioxide allowances focusing on the u s sulfur dioxide so2 allowance market from its inception in 1994 to 2009 we model allowance prices to determine the influence of market fundamentals on allowance price level and volatility we find evidence that the so2 market operates in ways that are not inconsistent with an efficient market prices that reflect marginal abatement costs after the first few years of the program but before a court decision that introduced significant uncertainty into the market in mid 2008 our empirical analysis finds that the so2 market similar to other emission markets studied in the literature can remain relatively inefficient for several years after launch we also find that market volatility increases in response to all types of communications from the administrator suggesting that the development of a formal communication strategy possibly similar to that used by central banks would reduce price volatility and increase the efficiency of the market

the influence of fundamentals on exchange rates findings from analyses of news effects as we survey the literature of macroeconomic news in the foreign exchange market we can by now look back on nearly 30 years of research the first studies which analysed news effects on exchange rates were established in the early 1990s see for example dornbusch almost at the same time meese and rogoff published their influential paper revealing the forecasting inferiority in exchange rates of structural models against the random walk this finding has shocked the pillars of exchange rate economics and thus cast general suspicion on research focusing on fundamentals in this field the eventual rising popularity of event studies can partly be attributed to the re establishment of the raison d etre of exchange rate economics this work focuses on systematically surveying this literature with particular respect to its primary goal i e shedding light on the analytical value of fundamental research thus its major findings are first fundamental news does matter whereas non fundamental news matters to a lesser degree second news influences exchange rates via two separated channels i e incorporating common information into prices directly or indirectly based upon order flow third with a few exceptions the impact of fundamental news on exchange rates is fairly stable over time

the effect of unanticipated money on the money and foreign exchange markets abstract a number of studies have attempted to determine why unanticipated increases in the money supply are positively correlated with money market interest rates by examining the response of the foreign exchange market to unanticipated changes in the money stock they have found a significant positive relationship between unanticipated increases in the money supply and the foreign exchange value of the dollar and have interpreted this as evidence for the anticipated liquidity effect hypothesis however these results support this hypothesis only if both markets respond simultaneously to unanticipated changes in money this paper examines the cross market consistency of the response using six bilateral exchange rates and the treasury bill rate all measured over a narrow time interval the results show that in general these markets do not respond simultaneously to money announcements

the effects of macroeconomic news on high frequency exchange rate behavior this paper studies the high frequency reaction of the dem usd exchange rate to publicly announced macroeconomic information emanating from germany and the u s by us ing data sampled at a five minute frequency we are able to identify significant impacts of most announcements on the exchange rate change in the 15 minutes post announcement although the significance of these effects decreases rapidly as the interval over which the post announcement change in exchange rates is increased the direction of the exchange rate response conforms in general with a reaction function interpretation whereby reac tions to macroeconomic news are driven by the likely operations of monetary authorities in domestic money markets further we detect influences of german monetary policy deci sions on the reaction of the exchange rate and also differences between u s and german announcements in the exchange rate reaction time pattern i introduction this paper studies the high frequency reaction of the dem usd exchange rate to macroeconomic information emanating from germany and the u s specif ically we utilize exchange rate data covering the period 1 1 92 to 31 12 94 sam pled at a five minute frequency to investigate how the major monthly macroe conomic releases from these two countries impact the dem usd the infor mation contained in announcements over this three year period is extracted via a set of market expectation series supplied by money market services interna tional mms 1 our analysis improves on previous work in this area in two main respects first our study is conducted using very high frequency data whereas most earlier work has used exchange rate data sampled at a frequency of a number of hours or more this allows us to construct a very precise characterization of

round the clock market efficiency and home bias evidence from the international japanese government bonds futures markets abstract this paper examines how information is processed between almost identical international futures markets london liffe and tokyo tse jgb futures in these markets variations in open to open changes are virtually the same as those of close to close changes suggesting that information is transmitted efficiently across markets with small opening pricing errors the overall results confirm market efficiency around the clock yet the intraday u shaped patterns in volume volatility of the london jgb futures suggest home bias in international investments indicating a less global view of trading than expected specifically at the liffe open london investors rush to rebalance portfolios instead of doing so at the tse close which is only one hour before the liffe opens

the intra day impact of communication on euro dollar volatility and jumps abstract in this paper we examine the intra day effects of verbal statements and comments on the fx market uncertainty using two measures continuous volatility and discontinuous jumps focusing on the euro dollar exchange rate we provide empirical evidence of how these two sources of uncertainty matter in measuring the short term reaction of exchange rates to communication events talks significantly trigger large jumps or extreme events for approximately an hour after the news release continuous volatility starts reacting prior to the news intensifies around the release time and stays at high levels for several hours our results suggest that monetary authorities generally tend to communicate with markets on days when uncertainty is relatively severe and higher than normal disentangling the us and euro area statements we also find that abnormal levels of volatility are mostly driven by the communication of the euro area officials rather than us authorities

interaction between stock markets an analysis of the common trading hours at the london and new york stock exchange abstract this paper examines the spill overs in both returns and volatility between the london and new york stock markets during overlapping trading hours using high frequency data for the ftse and s p stock index futures we estimate the seasonal patterns in volatility using a flexible fourier form specification the estimated seasonals are used to adjust the returns before conducting the lead lag analysis the results indicate that both markets influence each other although the impact of the usa on the uk is clearly stronger

volatility in wheat spot and futures markets 1950 1993 government farm programs seasonality and causality we explore how wheat spot and futures market volatility has been impacted by government farm programs during the 1950 1993 period we find that changing volatility in both markets is highly associated with changing farm programs the mandatory allotment programs of the 1950s and early 1960s 1 3 50 4 10 64 were associated with low volatility while the voluntary programs initiated in the mid 1960s seem to have induced high volatility 4 11 64 12 22 85 both market driven loan rates and conservation reserve programs appear to have helped volatility revert to lower levels since the mid 1980s 12 23 85 12 30 93 we also examine seasonality and causality in conjunction with the farm programs we explore how wheat spot and futures price volatility has been impacted by government farm programs many studies have examined the effects of various farm policies mckinnon 1967 blakeslee 1980 miranda and helmberger

intraday price reversals for index futures in the us and hong kong abstract we observe intraday price reversals following large price changes at the opening of the s p 500 futures market and the hsi futures market we note that the magnitude of subsequent price reversals is positively related to the initial price changes and that the price reversals are not caused by a bid ask spread or by panic among investors we also note that such price reversals can be exploited to give rise to profitable opportunities after transaction costs even though these may not be very significant this study shows that investor overreaction may be a universal phenomenon and irrational investor behavior like overreaction may also exist among groups of sophisticated investors

the inefficiency of reuters foreign exchange quotes abstract reuters foreign exchange fxfx page is the world wide predominant information source to foreign exchange traders in this study we compare the indicative spot exchange rate quotes from reuters with their matching futures exchange rates from the chicago mercantile exchange we find that the indicative quotes on reuters fxfx page are inefficient and could be improved by incorporating information from the futures market this casts doubt on the way banks determine these quotes as well as on the informational content of these quotes as an indicator of the current exchange rate

market reaction to public information the atypical case of the boston celtics abstract the publicly traded boston celtics limited partnership shares provide a unique means of studying the impact of information on equity prices the results of the celtics basketball games significantly affect partnership share returns trading volume and volatility controlling for the expectedvalue of the signal using betting market point spreads has little effect on these relations investors respond asymmetrically to wins and losses and playoff games have a larger impact on returns than regular season games opening prices do not fully reflect game results consistent with previous findings that significant volatility is caused by traders acting on private information

the impact of macroeconomic news on quote adjustments noise and informational volatility we study the impact of the arrival of macroeconomic news on the informational and noise driven components in high frequency quote processes and their conditional variances bid and ask returns are decomposed into a common efficient return factor and two market side specific components capturing market microstructure effects the corresponding variance components reflect information driven and noise induced volatilities we find that all volatility components reveal distinct dynamics and are positively influenced by news the proportion of noise induced variances is highest before announcements and significantly declines thereafter moreover news affected responses in all volatility components are influenced by order flow imbalances

private information flow and price discovery in the u s treasury market abstract using intraday data we identify the intensity of private information flow in the u s treasury market our results show that the intensity of private information flow is highly correlated with public information shocks and higher for longer maturity bonds more importantly we find that bond price changes associated with high intensity of private information flow tend to be persistent whereas those associated with low intensity of private information flow are more likely reversed while public information and private information are the main determinants of bond price variations on days with news announcements private information and liquidity shocks are important determinants of bond price variations on days with no significant events finally we show that the depth of limit order book is inversely related to the intensity of private information flow nevertheless informed dealers do not seem to use hidden orders to disguise their trading intentions

the short run dynamics of the price adjustment to new information we examine how prices in interest rate and foreign exchange futures markets adjust to the new information contained in scheduled macroeconomic news releases in the very short run using 10 second returns and tick by tick data we find that prices adjust in a series of numerous small but rapid price changes that begin within 10 seconds of the news release and are basically completed within 40 seconds of the release there is some evidence that prices overreact in the first 40 seconds but that this is corrected in the second or third minute after the release while volatility tends to be higher than normal just before the news release there is no evidence of information leakage in our analysis we correct for the biases created by bid ask spreads and tick by tick data

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

pre announcement effects news effects and volatility monetary policy and the stock market abstract i examine pre announcement and news effects on the stock market in the context of public disclosure of monetary policy decisions the results suggest that the stock market tends to be relatively quiet conditional volatility is abnormally low on days preceding regularly scheduled policy announcements although this calming effect is routinely reported in anecdotal press accounts it is statistically significant only over the past four to five years a result that i attribute to changes in the federal reserve s disclosure practices in early 1994 the paper also looks at how the actual interest rate decisions of policy makers affect stock market volatility the element of surprise in such decisions tends to boost stock market volatility significantly in the short run and positive surprises higher than expected values of the target federal funds rate tend to have a larger effect on volatility than negative surprises the implications of the results for broader issues in the finance and economics literatures are also discussed

modelling s p 100 volatility the information content of stock returns abstract theoretical models that relate volatility to the quantity of information are extended to a multi asset setting and it is deduced that stock returns may or may not have incremental information when modelling index volatility depending on the sources of information that move stock prices the first empirical study that can help resolve this theoretical uncertainty is presented a detailed analysis of the daily volatility of the s p 100 index from 1984 to 1998 shows there is some incremental volatility information in the returns from the 100 shares that define the index this evidence is obtained from arch models that incorporate leverage effects dummy variables for the 1987 crash and aggregate measures of stock return volatility significant differences between estimated volatilities are found for various stock measures and sub periods

segmentation and time of day patterns in foreign exchange markets abstract this paper sheds light on a puzzling pattern in spot foreign exchange markets domestic currencies appreciate depreciate systematically during foreign domestic working hours this phenomenon spans many years and several exchange rates and overrides calendar effects we argue that it is mainly due to liquidity and inventory patterns that emerge from the combination of two factors domestic agents tend to be net buyers of foreign currency and to trade mostly in their country s working hours the prevalence of domestic foreign traders demanding the counterpart currency during domestic foreign working hours implies sell price buy price pressure on the domestic currency during domestic foreign working hours

exchange rates and fundamentals new evidence from real time data abstract this paper analyses the link between economic fundamentals and exchange rates by investigating the importance of real time data we find that economic news in the united states germany and the euro area have been a driving force behind daily us dollar euro dem exchange rate developments in the period 1993 2003 the larger importance of us macroeconomic news is at least partly explained by their earlier release time compared to corresponding german and euro area news the exchange rate is also shown to respond more strongly to news in periods of large market uncertainty and when negative or large shocks occur overall the model based on real time data explains about 75 of the monthly directional changes of the us dollar euro exchange rate although it does not explain well the magnitude of the exchange rate changes

takeover activity among financial mutuals an analysis of target characteristics abstract this paper presents an empirical investigation of the merger process among mutuals using a large pooled cross section time series sample of uk building societies between 1981 and 1993 the financial services industry is probably unique in having a substantial mutual sector coexisting with and competing against joint stock firms however given the severely attenuated system of ownership claims in the financial mutual it has been widely predicted that this form will exhibit strong behavioural differences from the stock sector it is surprising therefore that despite the important governance role accorded to mergers in the corporate literature the merger process among financial mutuals has been almost totally ignored this paper explores the mutual merger process via an examination of the targets characteristics it finds little support for the natural selection view of mutual acquisitions but it does reveal the importance of the regulatory process above all the results show a surprising similarity to those from studies of the merger process in joint stock firms

intraday market effects in electronic soybean futures market during non trading and trading hour announcements abstractthis article investigates market reactions to major united states department of agriculture announcements during non trading and trading hours in the soybean futures market using microstruc

realized equicorrelation a bird s eye view of financial stress on equity markets this article addresses the issue of measuring the level of aggregate financial stress on stock markets which is a central issue for investors and policy makers to this end realized equicorrelation rec is obtained by plugging realized volatility as an input into the dynamic equicorrelation deco model where both the continuous and jump components of realized volatility are considered an application is provided for the 20 major stock markets over january 2000 may 2014 using intra day data the results remarkably pick up financial stress periods

how markets process information news releases and volatility we examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets we find these announcements are responsible for most of the observed time of day and day of the week volatility patterns in these markets while the bulk of the price adjustment to a major announcement occurs within the first minute volatility remains substantially higher than normal for roughly fifteen minutes and slightly elevated for several hours nonetheless these subsequent price adjustments are basically independent of the first minute s return we identify those announcements with the greatest impact on these markets we examine the impact on interest rate and foreign exchange markets of scheduled macroeconomic news releases such as the employment report the consumer price index cpi and the producer price index ppi many market participants believe that such announcements have a major impact on financial markets indeed a small industry devoted to predicting the figures to be released in upcoming releases has evolved in recent years with the exception of the weekly money supply figures however the impact of such announcements on financial markets has received scant attention 1 this is doubly surprising given the considerable research interest in market volatility since these news releases are a potential source of much of this volatility consider for instance figure 1 as shown there prices in interest rate and foreign exchange futures markets are much more volatile between 8 30 and 8 35 a m eastern time et than during any other five minute trading period including

talking heads the effects of ecb statements on the euro dollar exchange rate abstract this paper studies the reaction of the conditional mean and volatility of the euro dollar exchange rate to statements by european central bank and national central bank officials we focus on comments on monetary policy and the external value of the euro we find that the bundesbank has dominated the news coverage we conclude that ecb statements have mainly influenced conditional volatility in some cases there are effects of statements on the conditional mean of the euro dollar exchange rate efforts to talk up the euro have generally not been successful there is also evidence of asymmetric reactions to news

us presidential elections and implied volatility the role of political uncertainty abstract this paper focuses on the effects of political uncertainty and the political process on implied stock market volatility during us presidential election cycles using monthly iowa electronic markets data over five elections we document that stock market uncertainty as measured by the vix volatility index increases along with positive changes in the probability of success of the eventual winner the association between implied volatility and the election probability of the eventual winner is positive even after controlling for changes in overall election uncertainty these findings indicate that the presidential election process engenders market anxiety as investors form and revise their expectations regarding future macroeconomic policy

how the equity market responds to unanticipated events we examine the market reaction of prices volume spreads and trading location when firms experience events that are totally unanticipated by the equity market in terms of both timing and content we find that the response time is longer than previous studies have reported selling pressure wider spreads and higher volume remain significant for over an hour we also find an immediate price reaction for overnight events however the market takes longer to react to events that occur when it is open these findings may shed light on the efficacy of trading halts

economic instability in agriculture the contributions of prices government programs and exports in the first edition of foundations of farm policy 1970 p 343 i stated that the major long term problem of commercial farms is not labor mobility low resource returns or low income but rather is instability sources of instability have been traced to domestic macroeconomic policies by schultz to exchange rates by schuh and to each of those and farm output by firsh serious gaps remain in our knowledge of sources of instability however the purpose of this paper is to estimate sources of instability in u s farm income over time with special attention to the role of prices exports and government payments and commodity programs variation in production and utilization provide estimates of statistically appropriate stocks in aggregate and for feed grains soybeans and wheat

an investigation of transactions data for nyse stocks using transactions data the behavior of returns and characteristics of trades at the micro level is examined a minute by minute market return series is formed and tested for normality and autocorrelation evidence of differences in return distributions is found among overnight trades trades during the first 30 minutes following the market opening trades at the close and trades during the remainder of the day the latter distribution is found to be normal unusually high returns and standard deviations of returns are found at the beginning and the end of the trading day when the beginningand end of the day effects are omitted autocorrelation in the market return series is reduced substantially a number of patterns in trading are reported this paper empirically investigates the nature of the return generating process and the characteristics of trade size price changes trading frequency and trading interval at the level of individual trades for a large sample of nyse stocks previous studies of market indices have used daily weekly or monthly

expectations and risk premia at 8 30 a m deciphering the responses of bond yields to macroeconomic announcements what explains the sharp movements of the yield curve upon the release of major u s macroeconomic announcements to answer this question we estimate an arbitrage free dynamic term structure model

the determinants of future u s monetary policy high frequency evidence this paper examines the determinants of future u s monetary policy by studying the relationship between a predictor of the future direction of monetary policy and a pertinent information set specifically we investigate the impact of the surprise component of an array of macro economic announcements upon federal funds futures rates this investigation is conducted using high frequency intraday data in order to examine the exact timing of rate reactions to announcements in doing this we find that non farm payrolls and civilian unemployment announcements play a dominant role in determining future monetary policy moreover we document evidence that shows that the release of such information is rapidly incorporated into rates particularly when considering federal funds futures contracts traded via an electronic trading platform as opposed to an open auction trading platform

is information assimilated at announcements in the european carbon market abstract we examine the high frequency new information impact on prices volatility trading volume and illiquidity at scheduled macroeconomic and verified emissions announcements for the european carbon futures market verified emissions united states non farm payroll and german new factory order macroeconomic announcements impact carbon prices swiftly within 5 min we show that a one standard deviation surprise increase in verified emission announcements is associated with an approximate ten percentage point 9 96 increase in carbon futures returns a wait and see stylized trading behavior is evident at announcements in volatility and trading volumes market illiquidity increases at announcements in relation to united states non farm payroll albeit there is no evidence of an increase in illiquidity prior to announcements the development of new information impact over time occurs mainly in the at announcement 5 minute time interval

macroeconomic news order flows and exchange rates under rational expectations and efficient markets the news contained in public information announcements is directly impounded into prices with there being no role for trades in this process of information assimilation this paper directly tests this assertion using transaction level exchange rate data and a sample of scheduled macroeconomic announcements the main result of the paper is that even information that is publicly and simultaneously released to all market participants is largely impounded into prices via the key micro level price determinant order flow we quantify the role that order flow plays and find that between a half and two thirds of price relevant information is incorporated into prices via the trading process

macroeconomic news surprises volume and volatility relationship in index futures market abstractthis paper examines the role of macroeconomic news surprises on returns volatility of indian index futures market empirical literature posits that news arrivals have an influential impact

volatility in an era of reduced uncertainty lessons from pax britannica abstract although it has been well established that financial volatility is related to news and macroeconomic shocks less emphasis has been placed on the importance of underlying economic and political stability in this paper we study the behavior of consol returns since 1729 and identify a greater than 50 decline in volatility from the end of the napoleonic wars in 1815 until the first world war news events and macroeconomic variables cannot account for this extended period of reduced volatility underlying political stability under pax britannica seems to be a more likely explanation

macroeconomic announcements and asymmetric volatility in bond returns this study analyses the impact of macroeconomic news announcements on the conditional volatility of bond returns using daily returns on the 1 3 5 and 10 year us treasury bonds we find that announcement shocks have a strong impact on the dynamics of bond market volatility our results provide empirical evidence that the bond market incorporates the implications of macroeconomic announcement news faster than other information moreover after distinguishing between types of macroeconomic announcements releases of the employment situation and producer price index are especially influential at the intermediate and long end of the yield curve while monetary policy seem to affect short term bond volatility

information and asset prices in complete markets exchange economies abstract this note analyzes the effect of public information called news on asset price behavior in markovian recursive exchange economies with dynamically complete markets and risk averse agents a strong relationship between asset prices in two economies with the same fundamental structure but a different information structure is derived asset prices in the economy with more information are a weighted average of asset prices in the corresponding economy with less information this representation theorem implies that the unconditional mean of asset prices is independent of the information structure news process and that an increase in agents information a decrease in agents forecast error of future dividends and or discount factors increases the volatility of asset prices the unconditional variance of asset prices

the effect of macroeconomic news on beliefs and preferences evidence from the options market we examine the effect of regularly scheduled macroeconomic announcements on the beliefs and preferences of participants in the u s treasury market by comparing the option implied state price densities spds of bond prices shortly before and after the announcements we find that the announcements reduce the uncertainty implicit in the second moment of the spd regardless of the content of the news the changes in the higher order moments in contrast depend on whether the news is good or bad for economic prospects we explore three alternative explanations for our empirical findings relative mispricing changes in beliefs and changes in preferences we find that our results are consistent with time varying risk aversion

market perceptions of federal reserve policy and the weekly monetary announcements abstract in october 1979 the federal reserve altered its operating procedures emphasizing control of the growth rate of the money stock was the fed able to gain credibility in the market the paper investigates this question by examining the reactions of spot and expected future exchange rates foreign interest rates and long run domestic forward interest rates to the weekly federal reserve announcements of m l both before and after october 1979 the empirical evidence points out that the fed did gain credibility but was unable to establish full credibility the market reactions are consistent with the hypothesis that market participants attached a positive probability to the event that the fed may at some point in the future abandon its money stock targets

the effect of fomc votes on financial markets this paper shows that since votes of members of the federal open market committee have been included in press statements stock prices increase after the announcement when votes are unanimous but f

macroeconomic announcements and price discovery in the foreign exchange market this study shows that the dominance of the overlapping trading hours of london and new york in the price discovery of the eur usd and usd jpy markets only applies on days with u s announcements different from cai et al 2008 and wang and yang 2011 we highlight the informational advantage of local traders at the arrival of macroeconomic announcements in the local market and find that macroeconomic announcements affect the pattern of price discovery across different markets consistent with chen and gau 2010 and jiang et al 2012 we also examine changes in information shares before and after the announcement a significant increase in price discovery before the announcement suggests the possibility of information leakage while enhanced price discovery efficacy after the announcement suggests that prices gradually adjust to new information not just immediately respond to the arrival of announcements

the impact of economic news on bond prices evidence from the mts platform although there is an extensive literature on the impact of macroeconomic announcements on asset prices the bond market has received less attention than the foreign exchange and equity markets even less if we consider the european market this paper uses high frequency intra day data over a three year period to investigate the impact of regularly scheduled macroeconomic news and monetary policy announcements on the returns of the italian government bond market the largest one in the euro zone with respect to the previous papers we use a much broader set of announcements sixty eight and a relatively novel dataset mts we find that twenty five news have a significant impact on bond returns and that almost all announcements are incorporated into prices within twenty minutes from the release

economic news and equity market linkages between the u s and u k abstract the source of equity market linkages between the u s and u k is investigated by focusing on intraday price movements of stock index futures contracts we document heightened u k return volatility at 11 30 a m and 1 30 p m gmt which corresponds to regular macroeconomic releases in the u k and u s respectively the response of u k equities in the half hour surrounding the u s announcements is significant and similar to price movements for u s equities to the same announcements these results support the hypothesis that the documented international equity market linkages are attributable to reactions of foreign traders to public information originating from the u s

estimating the structure of market reaction to news information events and lumber futures prices we develop a new event study technique the distributional event response model derm appropriate to relatively slowly evolving information events we apply the model to twelve years of daily lumber futures prices and analyze the effects of three different types of information releases a monthly housing starts estimates b aperiodic administrative and judicial announcements about u s canada trade disputes and c novel and unprecedented court decisions related to the endangered species act esa the information releases are different in ways that predict their relative speeds of impoundment in prices we find that housing start events are absorbed more quickly than trade events which are absorbed more quickly than esa events

bidirectional causality in oil and gas markets abstract do events in the natural gas market cause repercussions in the crude oil market this paper studies linkages between the two markets using high frequency intraday oil and gas futures prices by analyzing the effect of weekly oil and gas inventory announcements on price volatility we show a bidirectional causal relationship both inventory gluts and shortages have a cross commodity effect on price volatility not only for the next month nearby futures contract but also for the following six months contracts

information content and the speed of stock price adjustment the process by which security prices adjust to the release of new information is an area of study which has received much attention in accounting and finance in finance the main interest has been whether prices adjust in a rapid and unbiased manner to new information in accounting the focus has been more on whether different accounting disclosures have information content the study reported here combined both interests in that we investigated the speed of adjustment of releases of information which had different degrees of information content as illustrations dann mayers and rabb 1977 tested the sensitivity of a block trade trading rule to the speed of price adjustments this rule first suggested by grier and albin 1973 is based on the assumption that abnormal returns can be earned by purchasing shares at the block price and selling at that day s closing price dann mayers and rabb hereafter dmr found that unless one could purchase the stock within five minutes of the block trade the profitability of the grier and albin rule was seriously impaired they also found the market price to be an unbiased estimate of the closing price within 15 minutes of the block trade similarly hillmer and yu 1979 devised an alternative test for the speed of price adjustment based on a cumulative sum technique they illustrated the technique by testing for shifts in the parameters of the distributions of price changes and of transaction frequencies around five information events two earnings announcements and three defense

common trends in global volatility abstract this paper investigates the long term patterns in global foreign exchange equity and bond markets in three different trading zones namely japan europe and the united states recent advances in the measurement of volatility from high frequency data are used together with the concepts of fractional integration and cointegration the specific objective is to consider whether there are common trends that drive volatility in the global marketplace this so called commonality in volatility hypothesis is formulated using a cofractional model the results confirm that volatility in all three financial asset markets across all three trading zones share a single common trend which lends itself to interpretation as a global news stream

the creation and resolution of market uncertainty the impact of information releases on implied volatility we model and examine the impact of information releases on market uncertainty as mea sured by the implied standard deviation isd from option markets distinguishing between scheduled and unscheduled announcements we hypothesize that since the timing although not the content of scheduled announcements is known a priori the pre release isd will impound the anticipated impact of important releases on price volatility and that the isd will normally decline post release as this uncertainty is resolved conversely we hypothesize that the unexpected high volatility caused by major unscheduled releases will cause market participants to adjust upward their estimates of likely volatility over the remaining life of the option resulting in an increase in the isd our evidence supports both hypotheses the isds that we consider are from the t bond eurodollar and deutschemark options markets we examine scheduled macroeconomic news releases such as the employment report and the ppi we also find that the observed tendency for the isd to fall on fridays and rise on mondays is due to the weekday pattern of scheduled news releases

information shares in the us treasury market abstract this paper highlights the previously neglected role of the futures markets in us treasury price discovery the estimates of 5 and 10 year govpx spot market information shares typically fail to reach 50 from 1999 on the govpx information shares for the 2 year contract are higher than those of the 5 and 10 year maturities but also decline after 1998 relative bid ask spreads number of trades and realized volatility are statistically significant and explain up to 21 of daily information shares in roughly 1 4 of cases when public information is released the futures market gains information share but macroeconomic announcements rarely explain information shares independently of liquidity

market evidence against widespread point shaving in college basketball abstract this paper proposes using market based information to investigate the likelihood of widespread point shaving in college basketball games with strong favorites information embodied in pre game money lines facilitates the calculation of the market s expectation that the game will end with a strong favorite winning but not covering the point spread a result deemed suspicious in previous studies additional market based information embodied in second half lines reveal how the market s expectation about second half play differs from pre game expectations applying our methodology to college basketball reduces previous estimates of the percentage of games thought to be consistent with potential point shaving to insignificant levels our approach can apply to other sports in which strong favorites are common

neutrality of inflation in the agricultural sector abstract the paper considers the effect of inflation on the relative prices of products traded in auction markets prices of us agricultural products are used for the period 1951 1981 since agricultural products are widely traded the real forces of supply and demand specific to agriculture are represented by foreign agricultural prices the exchange rate is entered as a separate variable influencing domestic agricultural prices trade between the usa and the ten countries included in the federal reserve board s trade weighted dollar is considered the empirical results are consistent with the hypothesis that inflation did not alter relative agricultural prices when the real forces of supply and demand and the exchange rate are held constant

money supply announcements and the market s perception of federal reserve policy this paper investigates the reason why innovations in money supply announcements cause interest rates to change the paper empirically discriminates between the liquidity premium and the expected inflation hypotheses by directly taking into account investors expectations regarding the federal reserve s monetary policy stance the results support the liquidity premium hypothesis and the model provides an explanation for the observed time variation in the response of interest rates to money announcement surprises copyright 1990 by ohio state university press

volume volatility and public news announcements we provide new empirical evidence for the way in which financial markets process information our results rely critically on high frequency intraday price and volume data for the s p 500 equity portfolio and u s treasury bonds along with new econometric techniques for making inference on the relationship between trading intensity and spot volatility around public news announcements consistent with the predictions derived from a theoretical model in which investors agree to disagree our estimates for the intraday volume volatility elasticity around important news announcements are systematically below unity our elasticity estimates also decrease significantly with measures of disagreements in beliefs economic uncertainty and textual based sentiment further highlighting the key role played by differences of opinion

interdependence and dynamics in currency futures markets a multivariate analysis of intraday data abstract this paper investigates long term interdependencies and short term dynamics in currency futures utilizing intraday data for six major foreign currencies the british pound deutsche mark swiss franc australian dollar canadian dollar and japanese yen lack of cointegration ci among the foreign exchange futures is found to be the prevailing mode of behavior but some temporary deviations from the no ci condition are detected there is a notable overlap between detected ci relationships and the timing of policy changes world events and regime shifts indicating that the observed cis are event driven the robustness of the ci results is checked with respect to variations in the model lag structure data period sample horizon and currency basket grouping impulse response functions irfs reveal that currency markets are in general efficient and absorb new information within the day the interdependence among currencies is found to be asymmetric

the high frequency impact of news on long term yields and forward rates is it real abstract macroeconomic news announcements move yields and forward rates on nominal and index linked bonds and inflation compensation this paper estimates the reactions using high frequency data on nominal and index linked bond yields allowing the effects of news announcements on real rates and inflation compensation to be parsed far more precisely than is possible using daily data long term nominal yields and forward rates are very sensitive to macroeconomic news announcements inflation compensation is sensitive to announcements about price indices and monetary policy however for news announcements about real economic activity such as nonfarm payrolls the vast majority of the sensitivity is concentrated in real rates accordingly most of the sizeable impact of news about real economic activity on the nominal term structure of interest rates represents changes in expected future real short term interest rates and or real risk premia rather than changes in expected future inflation and or inflation risk premia such sensitivity of real rates to macroeconomics news is hard to rationalize within the framework of existing macroeconomic models

is bad news cause of asymmetric volatility response a note this article uses a direct test of the impact of economic news on stock volatility the main interest is to test whether the asymmetric response of volatility can be due to the effect of bad news to do this this study takes items of news into account as exogenous variables the analysis is divided into two stages each of which uses different items of news as exogenous variables additional to the information provided by the residuals the first stage uses more exhaustively classified information whereas the second considers daily information as a global sign this study finds that bad news is responsible for most of the observed asymmetric behaviour of variance further this study detects that the gjr model adequately captures the impact of bad news when traders are not ready to carry out a time consuming analysis of the information

the implied jump risk of libor rates abstract this paper examines implied parameters from options on libor futures jump diffusion models are found to offer superior in sample and out of sample performance when compared to their pure diffusion counterpart the need to incorporate stochastic jump magnitudes into libor dynamics is also documented in addition empirical evidence reveals that the jump component in libor rates is important for pricing their derivatives furthermore variation in jump risk often coincides with federal open market committee fomc decisions and a small subset of macroeconomic announcements

an examination of stock market return volatility during overnight and intraday periods 1964 1989 this paper examines the variance of hourly market returns during 1964 89 results indicate that return volatility falls from the opening hour until early afternoon and rises thereafter and is significantly greater for intraday versus overnight periods market variance is also shown to change significantly over time rising after nasdaq began in 1971 rising after trading in stock options began in 1973 falling after fixed commissions were eliminated in 1975 rising after trading in stock index futures was introduced in 1982 and falling after margin requirements for stock index futures became larger in 1988 copyright 1990 by american finance association

volatility in the foreign currency futures market we examine the volatility implications of around the clock foreign exchange trading with transaction data on futures contracts from the chicago mercantile exchange and the london international financial futures exchange we find higher u s european and u s japanese exchange rate volatilities during u s trading hours and higher european cross rate volatilities during european trading hours while the diclosure of private information through trading may partly explain these volatility patterns we conclude that the increased volatility is more likely driven by macroeconomic news announcements an analysis of inter and intraday data also reveals that volatility increases at times that coincide with the release of u s macroeconomic news article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

institutional investment mergers and the market for corporate control the increasing importance of institutional investors as shareholders in individual companies has led to an important debate on their impact on corporate performance in this paper we focus on their role in the market for corporate control this has so far been the subject of very little systematic investigation despite its theoretical and practical significance we consider the impact of financial institutions using two u k merger samples and employing both univariate and multivariate techniques of analysis in the first sample drawn from the low merger period 1981 1983 pre and post merger differences are found between merging companies with and without a significant institutional presence however in the takeover boom year of 1986 from which the second sample is drawn all such distinctions become blurred

seasonality in foreign exchange volatility the paper reports further empirical evidence on seasonality in foreign exchange volatility using high frequency data using a basis of the signal plus noise framework the approach decomposes tick by tick reuters fxfx quotes into a random walk and a stationary component termed the efficient price and the pricing error respectively the efficient price is not directly observable and is an approximation of the true value the pricing error captures the deviation between the observed indicative quote and the efficient price under the proposed model daily and intraday volatilities of the efficient price are estimated a pronounced pattern of volatility is uncovered and appears related to the daily activity cycle of major organized stock exchanges it is argued that seasonality in volatility is a symptom of foreign exchange markets results confirm andersen and bollerslev s findings that significant seasonal effects are one important determinant of overall volatility at high frequencies

how does public information affect the frequency of trading in airline stocks abstract this paper examines how firm specific and macroeconomic announcements affect transaction rates in u s airline stocks using a version of the autoregressive conditional hazard framework of hamilton and jorda 2002 that incorporates market microstructure variables we show that on average trading intensity spikes prior and consequent to macroeconomic announcements but decreases around firm specific releases further when we use intraday crude oil futures returns as a proxy for industry relevant and globally important news we find that their effects are statistically significant with higher oil futures returns increasing the probability of trade

the reaction of exchange rates to economic news this paper examines the short run responses of spot exchange rates to several types of economic news survey data are used to divide economic announcements into expected and unexpected components with the latter measuring news the results indicate that exchange rates are systematically related to unexpected money announcements after the october 1979 switch in federal reserve operating procedures but not before this response does not appear to have changed however after the october 1982 federal reserve regime change short run exchange rate movements are not systematically related to news on inflation or real activity

why do markets move together an investigation of u s japan stock return comovements this article explores the fundamental factors that affect cross country stock return correlations using transactions data from 1988 to 1992 we construct overnight and intraday returns for a portfolio of japanese stocks using their nyse traded american depository receipts adrs and a matched sample portfolio of u s stocks we find that u s macroeconomic announcements shocks to the yen dollar foreign exchange rate and treasury bill returns and industry effects have no measurable influence on u s and japanese return correlations however large shocks to broadbased market indices nikkei stock average and standard and poor s 500 stock index positively impact both the magnitude and persistence of the return correlations stock return cross country covariances play a key role in international finance changes in these covariances affect the volatility of portfolios and asset prices as these covariances increase one expects that a fewer domestic risks are internationally diversifiable so portfolio volatility increases b the risk premium on the world market portfolio increases 1 c the cost of capital increases for individual firms and d the domestic version of the capm becomes increasingly inadequate 2 despite the important economic consequences of changes in cross country covariances the determinants of the levels and dynamics of these covariances have been little studied from an academic