Department of Economics and Business Economics

Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets

Research output: Working paperResearch

  • Torben G. Andersen, Duke University, United States
  • Tim Bollerslev
  • Francis X. Diebold, University of Pennsylvania, United States
  • Clara Vega, University of Rochester, United States
  • School of Economics and Management
Using a unique high-frequency futures dataset, we characterize the response of U.S., German
and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find
that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate
dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on
the stage of the business cycle, which explains the low correlation between stock and bond returns when
averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most
strongly to macroeconomic news; in particular, when conditioning on the state of the economy, the equity
and foreign exchange markets appear equally responsive. Finally, we also document important
contemporaneous links across all markets and countries, even after controlling for the effects of
macroeconomic news.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages36
Publication statusPublished - 2007

    Research areas

  • Asset Pricing; Macroeconomic News Announcements; Financial Market Linkages; Market Microstructure; High-Frequency Data; Survey Data; Asset Return Volatility; Forecasting

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ID: 10570029