Something in the Air: Information Density, News Surprises, and Price Jumps

Roland Fuess (), Markus Grabellus (), Ferdinand Mager () and Michael Stein ()
Authors registered in the RePEc Author Service: Roland Füss ()

No 1517, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: This paper introduces a new information density indicator to provide a more comprehensive understanding of price reactions to news and, more specifically, to the sources of jumps in financial markets. Our information density indicator, which measures the abnormal amount of noisy “ticker” news before scheduled macroeconomic announcements, is significantly related to the likelihood of price jumps and independent of the magnitude of news surprises or pre-announcement trading activity. We therefore interpret this variable as a measure of additional uncertainty in the market, which is resolved by macroeconomic news as “hard” facts.

Keywords: Information density; jump identification; macroeconomic announcements; noisy information; price discovery process (search for similar items in EconPapers)
JEL-codes: C58 F31 G12 G14 G15 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2015-08
New Economics Papers: this item is included in nep-ger and nep-mst
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http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1517.pdf (application/pdf)

Related works:
Journal Article: Something in the air: Information density, news surprises, and price jumps (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2015:17

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