Intraday futures market behaviour around major scheduled macroeconomic announcements

Australian evidence

Alex Frino*, Amelia Hill

*Corresponding author for this work

Research output: Contribution to journalArticle

33 Citations (Scopus)

Abstract

This paper examines intraday futures market behaviour around major scheduled macroeconomic information announcements on the Sydney Futures Exchange (SFE). Prior literature analysing intraday price behaviour around announcements is extended to trading volume and quoted bid-ask spreads. The analysis of price volatility, trading volume and quoted bid-ask spreads indicates that the majority of adjustment to new information occurs rapidly, within 240 seconds of the scheduled time for major announcements, with some evidence of abnormal activity prior to announcements. Analysis of quoted bid-ask spreads suggests that they significantly widen in the 20 seconds prior to announcements and remain significantly wider for 30 seconds following announcements. The increase in quoted spreads is related to both expected and unexpected volatility, implying that market participants increase quoted spreads around information announcements as a consequence of adverse selection costs.

Original languageEnglish
Pages (from-to)1319-1337
Number of pages19
JournalJournal of Banking and Finance
Volume25
Issue number7
DOIs
Publication statusPublished - Jul 2001

Keywords

  • Bid-ask spreads
  • G14
  • Information announcements
  • Volatility
  • Volume

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