Macroeconomic news surprises, volume and volatility relationship in index futures market

Ameet Kumar Banerjee, H. K. Pradhan, Trilochan Tripathy and A. Kanagaraj

Applied Economics, 2020, vol. 52, issue 3, 275-287

Abstract: This paper examines the role of macroeconomic news surprises on returns volatility of Indian Index futures market. Empirical literature posits that news arrivals have an influential impact on asset returns and returns volatility. Consistent with this proposition, we have undertaken a comprehensive examination to understand the relationship between macroeconomic news releases, trading volume, and returns volatility in an emerging financial market like India. Using high-frequency data sampled at 1-minute interval along with a broader class of macroeconomic news, we found that macroeconomic news surprises significantly affect both returns volatility and trading volume and that the response of Index futures contract to macroeconomic news surprise is rather swift and significant. Further, there is evidence that several macroeconomic news surprises seemingly exhibit asymmetric impact on the Index futures contract.

Date: 2020
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DOI: 10.1080/00036846.2019.1645277

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