Cojumping: Evidence from the US Treasury Bond and Future Markets (Discussion Paper 2010-06)
Mardi Dungey () and
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Lyudmyla Hvozdyk: School of Economics and Finance, University of Tasmania, http://www.utas.edu.au/economics-finance/
No 10450, Working Papers from University of Tasmania, Tasmanian School of Business and Economics
The basis between spot and future prices will be affected by jump behavior in each asset price, challenging intraday hedging strategies. Using a formal cojumping test this paper considers the cojumping behavior of spot and futures prices in high frequency US Treasury data. Cojumping occurs most frequently at shorter maturities and higher sampling frequencies. We find that the presence of an anticipated macroeconomic news announcement, and particularly non-farm payrolls, increases the probability of observing cojumps. However, a negative surprise in non-farm payrolls, also increases the probability of the cojumping tests being unable to determine whether jumps in spots and futures occur contemporaneously, or alternatively that one market follows the other. On these occasions the market does not clearly signal its short term pricing behavior.
Keywords: US Treasury markets; high frequency data; cojump test (search for similar items in EconPapers)
JEL-codes: C1 C32 G14 (search for similar items in EconPapers)
Date: 2010-07-14, Revised 2010-07-14
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Published by the University of Tasmania. Discussion paper 2010-06
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Persistent link: https://EconPapers.repec.org/RePEc:tas:wpaper:10450
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