The time‐to‐maturity pattern of futures price sensitivity to news

Hoàng Long Phan and Ralf Zurbruegg

Journal of Futures Markets, 2020, vol. 40, issue 1, 126-144

Abstract: This paper examines the effect time‐to‐maturity has on how sensitive futures prices are to news flows. Unscheduled daily news flows that relate to the underlying asset of a futures contract are related to the daily realized volatility of futures to calculate a price‐news sensitivity ratio. The observed pattern follows an inverted U‐shape relationship and has a bearing on whether the maturity effect will be noticeable in a futures contract. This paper also shows that by examining the peak‐to‐maturity of the price sensitivity to news pattern, it is possible to better identify which contracts are more likely to yield higher volatility.

Date: 2020
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https://doi.org/10.1002/fut.22046

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