A mean variance king? : creation and resolution of uncertainty under the employment report's reign

Nikolaus Hautsch and Dieter Hess

This paper delineates the simultaneous impact of non-anticipated information on first and second moments of the intraday price process by including appropriate variables accounting for the news flow into both the mean and the variance function. This allows us to differentiate between the consistent price reaction to surprising news and traders' uncertainty about the precise price impact of this information. Analyzing the US employment report, we find that headline information is almost instantaneously incorporated into T-bond futures prices. Nevertheless, large surprises create considerable uncertainty, in particular 'bad' news. In contrast, if surprises in related headlines cross-validate each other, less room for differences of opinion is left, and hence volatility is decreased.

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Year of publication:	2001
Authors:	Hautsch, Nikolaus
Other Persons:	Hess, Dieter (contributor)
Publisher:	Mannheim : ZEW
Subject:	Börsenkurs \| Share price \| Volatilität \| Volatility \| Staatspapier \| Government securities \| Zinsderivat \| Interest rate derivative \| Information \| Arbeitsmarktstatistik \| Labour statistics \| Informationsverbreitung \| Information dissemination \| Ankündigungseffekt \| Announcement effect \| Schätzung \| Estimation \| USA \| United States \| Maßzahl \| Statistical measures