New Economics Papers
on Market Microstructure
Issue of 2006‒12‒16
five papers chosen by
Thanos Verousis

  1. The impact of monetary policy signals on the intradaily euro-dollar volatility By Darmoul Mokhtar
  2. Modelling Financial High Frequency Data Using Point Processes By Luc, BAUWENS; Nikolaus, HAUTSCH
  3. Real-time price discovery in global stock, bond and foreign exchange markets By Torben G. Andersen; Tim Bollerslev; Francis X. Diebold; Clara Vega
  4. How do FOMC actions and U.S. macroeconomic data announcements move Brazilian sovereign yield spreads and stock prices? By Patrice Robitaille; Jennifer E. Roush
  5. Security Issue Timing: What Do Managers Know, and When Do They Know It? By Dirk Jenter; Katharina Lewellen; Jerold B. Warner

  1. By: Darmoul Mokhtar (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: In this paper, we investigate the impact of monetary policy signals stemming from the ECB Council and the FOMC on the intradaily Euro-dollar volatility, using high-frequency data (five minutes frequency). For that, we estimate an AR(1)-GARCH(1,1) model, which integrates a polynomials structure depending on signal variables, starting from the deseasonalized exchange rate returns series. This structure allows us to test the signals persistence one hour after their occurence and to reveal a dissymmetry between the effect of the ECB and Federal Reserve signals on the exchange rate volatility.
    Keywords: Exchange rates, official interventions, monetary policy, GARCH models.
    Date: 2006–12–06
  2. By: Luc, BAUWENS (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Nikolaus, HAUTSCH
    Abstract: In this chapter written for a forthcoming Handbook of Financial Time Series to be published by Springer-Verlag, we review the econometric literature on dynamic duration and intensity processes applied to high frequency financial data, which was boosted by the work of Engle and Russell (1997) on autoregressive duration models
    Keywords: Duration, Intensity, Point process, High frequency data, ACD models
    JEL: C41 C32
    Date: 2006–09–18
  3. By: Torben G. Andersen; Tim Bollerslev; Francis X. Diebold; Clara Vega
    Abstract: Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most strongly to macroeconomic news; in particular, when conditioning on the state of the economy, the equity and foreign exchange markets appear equally responsive. Finally, we also document important contemporaneous links across all markets and countries, even after controlling for the effects of macroeconomic news.
    Date: 2006
  4. By: Patrice Robitaille; Jennifer E. Roush
    Abstract: This paper provides a robust structural identification of the effects of U.S. interest rates on an emerging economy’s asset values. Using newly available intraday data, we investigate how surprises associated with U.S. macro data and FOMC announcements affectmove on intra-daily movements in the yield spread on a benchmark Brazilian government dollar-denominated bond and (the C-bond) as well as onthe Brazilian broad stock price index. Our study covers the period February 1999 to April 2005. We find that FOMC announcements that lead to an increase in U.S. interest rates are associated with a systematic increase in Brazil’s C-bond spread and a systematic decline in the Bovespa stock price index. Several U.S. macro data surprises, including for nonfarm payrolls and the CPI, prompt an increase in the Brazilian C-bond yield spread and a fall in Brazilian share prices. These combined findings suggest that, for Brazil during this period, the financial risks of higher U.S. interest rates rates in response to positive news about the U.S. economy dominated any benefits through trade or other channels in the determination of Brazilian asset valuations.
    Date: 2006
  5. By: Dirk Jenter; Katharina Lewellen; Jerold B. Warner
    Abstract: We study put option sales undertaken by corporations during their repurchase programs. Put sales' main theoretical motivation is market timing, providing an excellent framework for studying whether security issues reflect managers' ability to identify mispricing. Our evidence is that these bets reflect timing ability, and are not simply a result of overconfidence. In the 100 days following put option issues, there is roughly a 5% abnormal stock price return, and the abnormal return is concentrated around the first earnings release date following put option sales. Longer term effects are generally not detected. Put sales also appear to reflect successful bets on the direction of stock price volatility.
    JEL: G1 G14 G3 G32 G35
    Date: 2006–12

This issue is ©2006 by Thanos Verousis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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