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Working Paper 2007-032C

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"Jumps, Cojumps and Macro Announcements"
by Jérôme Lahaye, Sébastien Laurent, and Christopher J. Neely

We use recently proposed tests to extract jumps and cojumps from three types of assets: stock index futures, bond futures, and exchange rates. We then characterize the dynamics of these discontinuities and informally relate them to U.S. macroeconomic releases before using limited dependent variable models to formally model how news surprises explain (co)jumps. Nonfarm payroll and federal funds target announcements are the most important news across asset classes. Trade balance shocks are important for foreign exchange jumps. We relate the size, frequency and timing of jumps across asset classes to the likely sources of shocks and the relation of asset prices to fundamentals in the respective classes.

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Category > Applied Econometrics
Category > Finance
Category > International
Author > Christopher J. Neely