Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets

By Torben G. Andersen, Tim Bollerslev, Francis X. Diebold, Clara Vega. 2006

1,086 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/701ec4658bd50c33c102a02aec8a176a2d1bed69

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Citations in the corpus

Which News Moves the Euro Area Bond Market? (2006, positive): “financial market prices, see Andersen et al. (2005) .”
Risk, Jumps, and Diversification (2008, methodology): “2Empirical studies and new statistical procedures include the work of Ait-Sahalia and Jacod (2008), Andersen et al. (2007b), BarndorffNielsen and Shephard (2004), Fan and Wang (2006), Huang and Tauchen (2005), Jiang and Oomen (2006), Lee and Mykland (2008), and Mancini (2004). directly by these…”
Estimating the Spot Covariation of Asset Prices—Statistical Theory and Empirical Evidence (2014, positive): “These can be considered as the instantaneous counterparts to the integrated quantities studied, for example, in Andersen et al. (2003) and Barndorff-Nielsen and Shephard (2004).”
Global Financial Transmission of Monetary Policy Shocks (2009, neutral): “Other seminal studies on international co-movements of asset prices and on quantifying financial market integration are King and Wadhwani (1990), Lin et al. (1994), Bekaert and Harvey (1995), and more recently by Campbell et al. (2001), Griffin and Stulz (2001), Forbes and Rigobon (2002), Chinn and ”
Macroeconomic Cycles and the Stock Market's Reaction to Monetary Policy (2008, positive): “[Insert Table 3 about here] The empirical results in Tables 2 and 3 show economically large and significant state dependence in the response of stock returns to target rate news, in contrast to the results of Andersen et al. (2007) showing no such evidence.”
Stochastic Risk Premiums, Stochastic Skewness in Currency Options, and Stochastic Discount Factors in International Economies (2008, background): “Economically, incorporating the jump component is important in capturing large discontinuous movements in economic fundamentals and financial security prices as shown in Almeida, Goodhart, and Payne (1998), Andersen, Bollerslev, Diebold, and Vega (2003, 2007) , Beber and Brandt (2006a) ,a ndPasquar”
Informed and Strategic Order Flow in the Bond Markets (2006, neutral): “Fleming and Remolona (1997) and Balduzzi et al. (2001), among others].”