Can Information Be Locked-Up? Informed Trading Ahead of Macro-News Announcements

By Gennaro Bernile, Jianfeng Hu, Yuehua Tang. 2016

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Government agencies routinely allow pre-release access to information to accredited news agencies under embargo agreements. Using high-frequency data, we find evidence consistent with informed trading during embargoes of Federal Open Market Committee (FOMC) scheduled announcements. The E-mini Standard & Poor’s 500 futures’ abnormal order imbalances are in the direction of subsequent policy surprises and contain information that predicts the market reaction to the policy announcements. The estimated informed trades’ profits are arguably large. Notably, we find no evidence of informed trading prior to the start of FOMC news embargoes or during lockups ahead of nonfarm payroll, US Producer Price Index, and gross domestic product data releases.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/a59b74c02b0f01d03aec2166c1a7e046c5546a87

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Citations in the corpus

Risk Preferences and the Macroeconomic Announcement Premium (2018, background): “In a similar vein, Bernile, Hu, and Tang (2016) find evidence consistent with informed trading during a very short window (approximately 30 minutes) of news embargoes prior to the FOMC scheduled announcements and not of other macroeconomic announcements.17 While the timing of the above empirical…”