Central Bank Policy Announcements and Changes in Trading Behavior: Evidence from Bond Futures High Frequency Price Data

Koichiro Kamada, Tetsuo Kurosaki, Ko Miura and Tetsuya Yamada
Additional contact information
Tetsuo Kurosaki: Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: tetsuo.kurosaki@boj.or.jp)
Ko Miura: Research and Statistics Department, Bank of Japan (currently, University of Wisconsin-Madison)
Tetsuya Yamada: Director and Senior Economist, Institute for Monetary and Economic Studies (currently, Financial System and Bank Examination Department), Bank of Japan, (E-mail: tetsuya.yamada@boj.or.jp)

No 18-E-02, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: We present a theoretical model to explain how financial traders incorporate public and private information into security prices. We explain that the model enables us to simultaneously identify when public information caused surprises and how large an impact it had on the market. By applying the model to the tick-by-tick data on Japanese government bond futures prices, we show that the Bank of Japan's introduction of quantitative and qualitative monetary easing was one of the most surprising episodes during the period from 2005 to 2016. We also show that the sensitivity to the Bank's announcements has strengthened since the introduction of the negative interest rate policy, whereas the sensitivity to economic indicators and surveys has weakened substantially.

Keywords: Central bank announcements; Government bond futures; Herding behavior; Information efficiency; Market microstructure (search for similar items in EconPapers)
JEL-codes: C14 D40 D83 E58 G12 G14 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Central bank policy announcements and changes in trading behavior: Evidence from bond futures high frequency price data (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:18-e-02

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