Publication Type

Journal Article

Version

Preprint

Publication Date

9-2016

Abstract

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.

Keywords

Media Lockup, News Embargo, Informed Trading, FOMC Announcement, MacroeconomicNews

Discipline

Business | Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial Economics

Volume

121

Issue

3

First Page

496

Last Page

520

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2015.09.012

Publisher

Elsevier

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.jfineco.2015.09.012

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