'Information Effect' of economic news: SPI index futures

Abstract

The present study investigates the behaviour of SPI index futures returns, volatility and trading volume behaviour around the announcement of Current Account Deficit, Gross Domestic Product and Inflation. The futures market data is sampled at 1, 5 and 10 minute intervals at the announcement time. Futures market returns are found to react efficiently to good news. Volatility behaviour around announcements provides the same conclusion. After controlling for risk, a significant positive abnormal return can be earned based on the good news release. As for the relationship between returns, volatility and volume upon information arrival, returns are positively related to trading volume which is inconsistent with the 'short sales constraint' theory, Trading volume is found to increase as the level of volatility rises. The re-denomination of the SPI futures and options contract from $100 to $25 per basis point is found to increase trading volume in excess of that expected due to the re-denomination. However, the market return and volatility is unaffected by the re-denomination.