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Price Drift Before U.S. Macroeconomic News: Private Information about Public Announcements?

Published online by Cambridge University Press:  19 December 2018

Alexander Kurov ,
Alessio Sancetta ,
Georg Strasser  and
Marketa Halova Wolfe
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Abstract

We examine stock index futures and Treasury futures around the release time of 30 U.S. macroeconomic announcements. Nine of the 20 announcements that move markets show evidence of substantial informed trading before the official release time. Prices begin to move in the “correct” direction approximately 30 minutes before the release time. The preannouncement price drift accounts on average for approximately 40% of the total price adjustment. This implies that some traders have private information about macroeconomic fundamentals. Preannouncement drift might originate from a combination of information leakage and superior forecasting that incorporates proprietary data.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 54 , Issue 1 , February 2019 , pp. 449 - 479
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2018 

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Footnotes

1

We thank Gennaro Bernile (the referee), Jennifer Conrad (the editor), Clifton Green, Oleg Kucher, Alan Love, Ivelina Pavlova, Sheryl-Ann Stephen, Avanidhar Subrahmanyam, Yuehua Tang, Harry Turtle, Christoph Wegener, Alminas Zaldokas, and participants at the 2015 Eastern Finance Association Conference, the 2015 Financial Management Association International Conference, the 2015 NYU Stern Microstructure Conference, the 2015 International Conference on Computational and Financial Econometrics, the 2015 International Paris Finance Meeting, the 2016 Society for Financial Studies Finance Cavalcade, the 2016 Multinational Finance Society Conference, the 2016 European Financial Management Association Conference, the 2016 World Finance Conference, the 2016 Liberal Arts Macro Workshop, the 2017 Workshop on Financial Econometrics and Empirical Modeling of Financial Markets, and seminar participants at the Federal Reserve Bank of St. Louis, Laval University, Middlebury College, University of New Hampshire, U.S. Commodity Futures Trading Commission, Washington State University, and West Virginia University for helpful comments. We also thank Chen Gu, George Jiranek, and Dan Neagu for research assistance. Any views expressed in this article are those of the authors and do not necessarily reflect the views of the European Central Bank or the Eurosystem.

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