How Markets Process Information: News Releases and Volatility

Louis H Ederington and Jae Ha Lee

Journal of Finance, 1993, vol. 48, issue 4, 1161-91

Abstract: The authors examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets. They 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. The authors identify those announcements with the greatest impact on these markets. Copyright 1993 by American Finance Association.

Date: 1993
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