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Liquidity And Maturity Effects Around News Releases

Author

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  • Rohan Christie‐David
  • Mukesh Chaudhry

Abstract

We study the effects of liquidity and term‐to‐maturity following macroeconomic news announcements. To do this we select five instruments that differ in liquidity, or term‐to‐maturity, or both, and examine their response to the release of macroeconomic news. The results from this study suggest that variance on announcement days is higher in more liquid, longer term‐to‐maturity instruments. When instruments differ in both term‐to‐maturity and liquidity, term‐to‐maturity effects dominate. Tests for persistence in higher volatility in the five instruments following news releases show that most of the effects of the announcements seem to be well absorbed within fifteen minutes of the announcements. However, the evidence also suggests that the effects persist for longer periods in instruments that are more liquid. Term‐to‐maturity appears to have little or no effect in this instance.

Suggested Citation

  • Rohan Christie‐David & Mukesh Chaudhry, 1999. "Liquidity And Maturity Effects Around News Releases," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(1), pages 47-67, March.
    • Handle: RePEc:bla:jfnres:v:22:y:1999:i:1:p:47-67
    DOI: 10.1111/j.1475-6803.1999.tb00714.x
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    Cited by:

    1. Adam Clements & Neda Todorova, 2014. "The impact of information flow and trading activity on gold and oil futures volatility," NCER Working Paper Series 102, National Centre for Econometric Research.
    2. Hess, Dieter, 2001. "Surprises in U.S. macroeconomic releases: Determinants of their relative impact on T-Bond futures," CoFE Discussion Papers 01/01, University of Konstanz, Center of Finance and Econometrics (CoFE).
    3. Hautsch, Nikolaus & Hess, Dieter & Veredas, David, 2011. "The impact of macroeconomic news on quote adjustments, noise, and informational volatility," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2733-2746, October.
    4. repec:hum:wpaper:sfb649dp2010-005 is not listed on IDEAS
    5. Sanjay Ramchander & Marc Simpson & Mukesh Chaudhry, 2003. "The impact of inflationary news on money market yields and volatilities," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 27(1), pages 85-101, March.
    6. Nikkinen, Jussi & Sahlstrom, Petri, 2004. "Scheduled domestic and US macroeconomic news and stock valuation in Europe," Journal of Multinational Financial Management, Elsevier, vol. 14(3), pages 201-215, July.
    7. Nikolaus Hautsch & Dieter Hess, 2002. "The Processing of Non-Anticipated Information in Financial Markets: Analyzing the Impact of Surprises in the Employment Report," Review of Finance, European Finance Association, vol. 6(2), pages 133-161.
    8. Christiansen, Charlotte, 2002. "Credit spreads and the term structure of interest rates," International Review of Financial Analysis, Elsevier, vol. 11(3), pages 279-295.
    9. Hughes, Michael P. & Smith, Stanley D. & Winters, Drew B., 2007. "An empirical examination of intraday volatility in on-the-run U.S. Treasury bills," Journal of Economics and Business, Elsevier, vol. 59(6), pages 487-499.
    10. Chen, Kim Heng & Han, Li-Ming, 2006. "Efficiency in Information Processing: A Study of Non-Nearby Currency Futures and Relationships with Nearby Counterparts," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 2(1), pages 1-29.
    11. Adam E. Clements & Neda Todorova, 2016. "Information Flow, Trading Activity and Commodity Futures Volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(1), pages 88-104, January.

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