Macroeconomic News Announcements, Financial Market Volatility and Jumps

Xin Huang* ( Duke University)


This paper studies the financial market responses to macroeconomic news announcements, in the form of volatility and jumps. The traditional empirical literature using daily or lower-frequency data finds mixed or relatively weak evidence of big price movements during the announcement periods, which seems to falsify the efficient market hypothesis. However, with the advance of high frequency data, recent literature has discovered some links between macroeconomic news announcements and financial market responses. This paper extends the recent literature by separating market responses into continuous volatility and discontinuous jumps using some recent jump detection test statistics, and differentiating the market's disagreement based on survey data and uncertainty based on economic derivatives. Using more than a decade of high-frequency data, this paper finds that there are more large jumps on news days than on no-news days, with the fixed-income market being more responsive than the equity market, and nonfarm payroll employment being the most influential news. Surprises in forecasts impact the fixed-income market more than the equity market, while disagreement and uncertainty influence both markets with different effects on volatility and jumps.