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Abstract

This paper examines the effect of adjusting for the intra-day volatility pattern on jump detection.
Using tests that identify the intra-day timing of jumps, we show that before the adjustment,
jumps in the financial market have high probability of occurring concurrently with pre-scheduled
economy-wide news announcements. We demonstrate that adjustment for the U-shaped volatility
pattern prior to jump detection effectively removes most of the association between jumps and
macroeconomic news announcements. We find empirical evidence that only news that comes with
large surprise can cause jumps in the market index after the volatility adjustment, while the effect
of other types of news is largely absorbed through the continuous volatility channel. The FOMC
meeting announcement is shown to have the highest association with jumps in the market both
before and after the adjustment.

Item Type:	Report (Discussion Paper)
Authors/Creators:	Yao, W and Tian, J
Keywords:	volatility pattern, intra-day jumps, news announcements, high frequency data
Publisher:	University of Tasmania
Item Statistics:	View statistics for this item

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