Can information be locked up? Informed trading ahead of macro-news announcements

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 Standa...

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Bibliographic Details
Published in:Journal of financial economics 2016-09, Vol.121 (3), p.496-520
Main Authors: Bernile, Gennaro, Hu, Jianfeng, Tang, Yuehua
Format: Article
Language:English
Subjects:
Embargoes & blockades
Federal Open Market Committee
Federal Reserve monetary policy
FOMC
FOMC announcement
Futures trading
High frequency trading
Informed trading
Insider dealing
Insider trading
Macroeconomic news
Media lockup
News embargo
Price indexes
Studies
United States
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Summary: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.
ISSN:0304-405X
1879-2774
DOI:10.1016/j.jfineco.2015.09.012