The impact of market-specific public information on return variance in an illiquid market

A study provides evidence on the impact of public information on return volatility by comparing return volatility across trading and nontrading periods in the market for municipal bond futures (MBF). Prior research is extended along 2 key dimensions: 1. the impact of the purest form of market-specif...

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Bibliographic Details
Published in:The journal of futures markets 1997-12, Vol.17 (8), p.887-908
Main Authors: Christie-David, Rohan, Koch, Timothy W.
Format: Article
Language:English
Subjects:
Economic models
Futures trading
Impact analysis
Information
Information dissemination
Liquidity
Municipal bonds
Rates of return
Stock exchange
Stock returns
Studies
Variance
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Summary:A study provides evidence on the impact of public information on return volatility by comparing return volatility across trading and nontrading periods in the market for municipal bond futures (MBF). Prior research is extended along 2 key dimensions: 1. the impact of the purest form of market-specific public information, the formal announcement of the price of the underlying contract on which trading is based, and 2. the impact of information in a market that is well known for its relative illiquidity. Because the MBF market is presumably composed of relatively few informed traders with precise knowledge of price information, as well as a few uninformed traders, the arrival of public information in could have a greater impact on trading activity. In direct contrast to prior studies, the empirical results indicate that the release of market-specific public information reduces both trading and nontrading variance.
ISSN:0270-7314
1096-9934
DOI:10.1002/(SICI)1096-9934(199712)17:8<887::AID-FUT3>3.0.CO;2-H