How Markets Process Information: News Releases and Volatility

TLDR

The study examines how scheduled macroeconomic news announcements affect interest rate and foreign exchange futures markets, focusing on identifying the most impactful releases. The authors identify the announcements with the greatest impact on these markets. Announcements account for most time‑of‑day and day‑of‑week volatility, with price adjustments peaking in the first minute and volatility remaining elevated for about fifteen minutes and slightly for hours, yet later adjustments are largely independent of the initial return.

Abstract

ABSTRACT 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.