The impact of macroeconomic announcements in the Brazilian futures markets

Marcio Garcia (), Marcelo Medeiros () and Francisco Eduardo de Luna e Almeida Santos
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Marcio Garcia: Department of Economics PUC-Rio
Francisco Eduardo de Luna e Almeida Santos: Department of Economics PUC-Rio

No 623, Textos para discussão from Department of Economics PUC-Rio (Brazil)

Abstract: The estimation of the impact of macroeconomic announcements in the Brazilian futuresmarkets is used to uncover the relationship between macroeconomic fundamentals andasset prices. Using intraday data from October 2008 to January 2011, we find thatexternal macroeconomic announcements dominate price changes in the ForeignExchange and Ibovespa futures markets, while the impact of the domestic ones ismainly restricted to Interest Rate futures contracts. We additionally propose aninvestment strategy based on the conditional price reaction of each market that showedpromising results in an out-of-sample study, where we are able to correctly identifyreturns’ signals, conditional on the surprise’s signal, in approximately 70% of the cases.Finally, we provide evidence that price reactions are conditional on the state of theeconomy and document the impact on volume and bid-ask spreads.

Pages: 74p
Date: 2014-05
New Economics Papers: this item is included in nep-mac and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:rio:texdis:623

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