What Moves Euro-Bund Futures Contracts on Eurex? Surprises!

Franck Moraux () and Arnaud Richard
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Arnaud Richard: VARIANCE ARBITRAGE

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Abstract: This paper investigates the rarely studied Euro-Bund Futures contract to measure how and how long intraday prices react to a list of macroeconomic news. We emphasize the key role of information content which is the unexpected component of news or, for short, the surprise. We collect a long and recent (1997–2007) database made of hand-collected macroeconomic news releases and median forecasts as well as prices sampled at a 1-min frequency. We find that the gap between expected values and finally announced values matters for modeling returns and volatility. Moreover, the information content of U.S. macroeconomic news can influence the price dynamics significantly and more than German news. Returns and volatility behave quite differently however. While returns adjust almost instantaneously, volatility is impacted over several minutes up to 50 min long. The information content is also found to be important for the Euro Bund Futures next price, while the pure news release effect is key for volatility. Finally we provide preliminary evidences that the timing of news should not be neglected and that one should take care about the negative or positive message conveyed by the information content.

Keywords: Algorithmic trading; financial crisis; high frequency trading; market microstructure; order book dynamics (search for similar items in EconPapers)
Date: 2014
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Published in Market Microstructure and Nonlinear Dynamics. Keeping Financial Crisis in Context, Springer International Publishing, pp.129-153, 2014, 978-3-319-05211-3. ⟨10.1007/978-3-319-05212-0_5⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01075657

DOI: 10.1007/978-3-319-05212-0_5

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