Macroeconomic news and price jumps: evidence from ETFs and LOFs in China
Abstract
Purpose
We examine the relationship between macroeconomic news and fund price jumps, using high-frequency 5-min intraday data for Exchange Traded Funds (ETFs) and Listed Open-end Funds (LOFs) from 2019 to 2020.
Design/methodology/approach
We utilize the non-parametric jump test known as the LM method to detect fund price jumps. In addition, we perform Logistic regression to analyze the relationship between macroeconomic news and fund price jumps. Moreover, we use multiple linear regression to explore the relationship between fund price jumps and subsequent returns.
Findings
The probability of price jumps increases by 22.56% when macroeconomic news is released. Moreover, the returns associated with news-driven price jumps display a reversal pattern, and there is an asymmetric relationship in subsequent returns following macroeconomic shocks. Specifically, funds tend to exhibit lower returns after news-driven price jumps compared to those that are not influenced by news events.
Research limitations/implications
In today's digital age, investors have unprecedented access to a wealth of information through the Internet and various communication platforms. News and market data can be instantly accessed and disseminated, allowing for swift dissemination of information to investors worldwide. However, despite this enhanced accessibility, investors continue to exhibit overreactions or underreactions to new information.
Practical implications
Macroeconomic news release provide crucial insights into the overall health and performance of the economy. By monitoring and analyzing these indicators, investors can gain valuable information that can guide their investment decisions. Furthermore, by fostering a transparent and reliable information disclosure systems, governments can play a critical role in ensuring the stability and transparency of the funds market.
Originality/value
The paper utilizes 5-min high-frequency data from funds and incorporates a comprehensive macroeconomic news information database. These methodological choices enhance the precision and reliability of the analysis, allowing for a more nuanced understanding of the relationship between macroeconomic news releases and fund price jumps.
Keywords
Acknowledgements
We acknowledge the financial support from the National Natural Science Foundation of China (Grant No. 71972087) and Jinan University Research Funds (Grant No. 19JNLH05).
Citation
Su, D. and Hu, T. (2024), "Macroeconomic news and price jumps: evidence from ETFs and LOFs in China", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-10-2023-1594
Publisher
:Emerald Publishing Limited
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